Jefferies sticks to 'buy' on BP, says gearing can come down

Analysts at Jefferies reiterated their 'buy' recommendation and 600p target price for oil giant BP's shares on Wednesday, pointing to the potential for the company to lower its gearing and highlighting the success of its downstream activities.

The company's balance sheet was still "stretched and under pressure", with gearing above 30%, but as divestiture proceeds came in that could be reduced to the mid-20% level, Jefferies said.

The analysts also called attention to BP's big beat in Downstream, thanks to a "strong contribution" from trading, which drove results that came in 14% ahead of consensus and 21% above their own estimates.

Among the potential catalysts for share price gains, Jefferies cited share buybacks to fully offset the dilution from its script dividends in the third quarter of 2017, which management had penciled-in for completion by year end 2019.

Also cited as potential drivers of the share price were asset divestitures to fund its liabilities from the Macondo oil spill and the acquisition of BHP's acreage in the Permian.