And Still a Bull Story Exists for BP

If developments around the final Macondo bill and Russian joint venture positively surprise, the upside could be material

Stephen Simko, CFA 1 September, 2011 | 11:56AM
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The Macondo oil spill created billions of unexpected costs for BP (BP.) and adds uncertainty relative to its peers as to when it will be able to attain new drilling licences in the Gulf, a major source of its production. Adding to its troubles, BP also saw its Rosneft deal thwarted by its partners at TNK-BP, highlighting that its major Russian joint venture (more than 25% of BP's production) comes with major risks. Put together, BP currently faces a lot of uncertainty in how much its Macondo bill will be and how it will grow production and reserves. Still, a bull story exists. Macondo costs, both in total claims reported and civil penalties levied, could wind up below market expectations. And though BP will be challenged to grow production, it's possible the company will find sufficient new discoveries to allay investor concerns. If developments in these two areas positively surprise, the upside could be material.

Morningstar equity anayst Stephen Simko has updated his projections and investment case for BP; read the full Research Report here.

Morningstar's Equity Research Report contains our analyst's independent view on a company's investment case, valuation, financial health and stewardship. Morningstar Research is available to Premium subscribers.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BP PLC466.25 GBX-0.01Rating

About Author

Stephen Simko, CFA  is a senior stock analyst at Morningstar.

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