Credit Suisse upgrades BP to 'outperform' on valuation

The bank said the progress made on capital productivity and efficiency, as presented at the recent field trip in Baku, “is impressive and should be applauded”.

It said that as a result, the oil giant has a better-than-expected cash cycle, which somewhat de-risks dividend sustainability. It also had a larger-than-expected resource base that can be commercially developed, thereby reducing the risk of/need for bigger M&A.

Credit Suisse noted that with capex also trending lower, driven mostly by efficiency gains, BP is confident on its $50-55/bbl break-even target, which assumes the Macondo related payments to be paid for by disposal proceeds.

“Since the Baku trip, we have somewhat more confidence on the longer term sustainability of the business, albeit we still view its portfolio depth and quality in need for improvement,” said CS.

More broadly, the bank said a rebalance in oil markets is on its way, but oil markets are likely to remain volatile going forward.

“In a more volatile world, the challenge is to find the right balance between the short and the long term; instead of just focusing on the full field NPV, and thereby taking a long term view, it is critical that companies balance this longer term view with a stronger focus on short term cash flow and returns.”

At 0900 GMT, BP shares were up 3.1% to 473.75p.