Citigroup downgrades BHP Billiton on oil price headwinds

Mining firm BHP Billiton saw its stock rating downgraded to ‘neutral’ by Citigroup on Thursday following the release of its annual production this week.

Citi lowered the recommendation from ‘buy’, while it maintained its 12-month target price at 1350p.

BHP saw a mixed bag in its annual reporting of production levels on Wednesday, with an uplift in iron ore and energy coal production but lagging levels of petroleum and copper.

In a research note released by Citi, the banking group said there was still plenty of upside for the FTSE 100-listed firm.

“We downgrade BHP's recommendation to Neutral from Buy driven by share price appreciation. The slight reduction in NPV has been driven by FY18 earnings downgrades from lower production and a lower LT oil price,” Citi analysts said.

Citi added that it was more positive about the prospects of its competitor Rio Tinto despite a likely reverse in declining production this year.

“After 2 years of declining production BHP is set to reverse this trend in FY18, but is still facing an oil production/price headwind and we prefer Buy rated Rio Tinto as our diversified/iron ore/aluminium exposure.”

BHP Billiton’s share price was trading 0.22% higher as of 12:28 BST on Thursday following the downgrade.