Berenberg stays at 'buy' on BP, says higher shareholder returns may arrive with full-year results

Berenberg sounded a positive note on shares of BP on Tuesday following the oil major's third quarter trading statement.

In their judgement, financial markets had been loooking for a higher quarterly dividend instead of the playout that was finally announced, which might have disappointed some shareholders.

However, they believed that an announcement on further shareholder returns might now come alongside its full-year results, highlighting that BP's new chief executive officer would be in place by then.

Furthermore, they described the company's $6.4bn quarterly cash flow - pre-Gulf of Mexico payments and before working capital requirements- as "strong".

"Overall, we view this as a positive set of results, with strong underlying cash flow generation and a solid operational beat relative to reduced expectations for the quarter," the German broker said.

With the shares changing hands on seven times' their estimate for the outfit's enterprise value-to-debt-adjusted cashflow, they reiterated their recommendation to 'buy' and 600.0p target price.

For their part, analysts at RBC said the firm's decision to eliminate the scrip dividend option, instead of giving into calls for higher returns, was a "prudent step" given where the company's balance sheet was at, with gearing of roughly 35.6% "well above" the usual range.

RBC was at 'outperform' on the shares with a 550.0p target price.

"We remain constructive on BP for its medium-term growth profile and improving cash flow framework," RBC said.

"This growing profile should, over time, lead to improving returns. In the near term, we expect the focus to be on de-levering the balance sheet."