This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Heavyweight BP’s Q3 results have sent its shares over 3% higher, adding a significant 12pts to the UK 100 index this morning. This comes after the oil major delivered a consensus-beating $1.87bn in Underlying Replacement Cost Profits (preferred industry measure), reporting its highest refining earnings in five years and good news of its E&P segment being back in the black. It also disclosed a $49/barrel break-even oil price which is well below the current $60 for Brent, a level not seen since mid-2015 when oil it began a second leg down amid global oversupply concerns.
The shares have already made a bullish test of 520p – a fresh high for 2017. However they are as yet unable to crack what is unbroken resistance going all the way back to May 2010 when the shares were in freefall on developing news of the Gulf of Mexico disaster. Whilst income seekers may be miffed at no increase to the 10c per quarter dividend, resumption of a supportive share buyback to offset scrip dividends (shares instead of cash) has been well received. It suggests management even more comfortable with current oil prices, considering cash generation more than capable of covering commitments to both growth and capital returns. It’s also suggestive of even more water under the bridge from what has been a very expensive legal process and forced retrenchment.
Bulls are asking whether an oil production cut extension can drive oil prices even higher, taking BP back to the 650p April 2010 highs from whence they fell (+26%). Bears are wondering whether this merely represents a chance to short at the top and piggyback any retrace of the 19% bounce from September’s 2017 lows. In fact, does it offer a straddle opportunity?
Mike van Dulken, Head of Research, 31 Oct 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
Comments are closed.