UBS upgrades BP and downgrades Premier Oil

The Swiss bank said that the European E&P sector has been hit hard by the oil price and many of its projects were among some of the industry's more economically challenged and in marginal geographies.

"Too much capital was poorly deployed into the downturn, now manifest as redundant debt on balance sheets and necessitating 'survival' strategies. There is no broad 'deep value' call to be made yet... Stock selection remains key."

As such, UBS said it sees valuations reflecting new low oil prices but historic cost bases.

"We believe that managements can address these issues and bring cash back into balance, in which case there is attractive upside," it said.

"BP looks harshly sold off but very focussed on this issue and hence we upgrade to 'buy' alongside Shell/BG, Eni, Statoil and GALP."

On the other side of the coin, FTSE 250 exploration and production company Premier Oil's core net asset value is now some way below the share price and "in this environment, the market is unlikely to de-risk its unsanctioned, logistically challenging, high cost Sea Lion project".