BP, Europe's second-largest oil company, should consider following in the footsteps of ConocoPhillips and mull spinning off its refining business into a separate entity, analysts at least two brokerage firms said. Last week, ConocoPhillips (COP), the third-largest U.S. oil company, said it will spin-off its refining and market operations into a separate, publicly traded entity in 2012.
Under pressure from shareholders to raise cash and bolster production, BP (BP) has seen its shares plunge 30% since the Gulf of Mexico oil spill in 2010. That leaves BP trading at a 44% discount to the sum of the parts of its business, compared with an average discount of 27% for the world?s biggest oil companies, Bloomberg News reported, citing JPMorgan.
Analysts at Bank of America Merrill Lynch and UBS said BP would unlock value for shareholders by spinning off its downstream operations, Bloomberg reported. JPMorgan said it suggested BP spin-off its downstream business in 2006 and noted that following Conoco's announcement, pressure on BP to do the same may have increased.
Since Conoco's announcement, analysts have also speculated as to whether Dow components Exxon Mobil (XOM) and Chevron (CVX), the two largest U.S. oil companies, would follow suit. Chevron has since said it is committed to the integrated business model.