BP shares slide on market update but brokers overall remain positive

4th February 2014

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BP shares have fallen back in mid-morning trading as the oil-refining giant announces that weaker margins and escalating costs coupled with the aftermath of 2010’s Gulf of Mexico oil spill have hit profits writes Philip Scott.

In its latest market update, published this morning the FTSE 100 listed firm announced that so-called underlying replacement cost profits, a measure which essentially cuts out oil price fluctuations dropped, from $3.9bn to $2.8bn in the fourth quarter, just slightly ahead of City forecast.

By 11am, Tuesday, February 4, the stock was off by almost 1.5% – the decline, means its stock is now off 2% over the past week.

In all, full-year profits declined from $17.1bn to $13.4bn. However some brokers are seeing it as a buying opportunity and analysts at Deutsche today reiterated their ‘buy’ recommendation on the stock, while Canaccord Genuity reaffirmed a ‘hold’ position. Overall, the broker consensus is pointing towards a ‘buy’ according to Digital Look.

To date BP has BP has sold off some $38bn worth of assets since the Deepwater Horizon oil spill disaster in the Gulf of Mexico in a bid to fund compensation payouts.

According to a report on the BBC this has hit production. BP said it expected reported production to be lower in 2014 due to the sales.

Last year it stated it still had plans to offload another $10bn worth of assets. On today’s update, BP chief executive Bob Dudley said: “BP delivered strong operating performance throughout 2013, with increased asset reliability and major project delivery in both our upstream and downstream businesses. These achievements underpin our financial targets for 2014 and lay the foundation for continued growth in sustainable free cash flow.”

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