Evercore ISI added BP (LON: BP.) to its “Tactical Outperform” list on Wednesday, pointing to a surge in cash generation as higher oil prices lift the energy major’s finances.
The firm said BP could generate $15 billion of free cash flow in the second half at current commodity strips and refining margins, and $21 billion of excess cash flow. It kept an in-line rating and $52 price target on the stock.
With a new chief executive and board chair in place, Evercore believes management is “undertaking a methodical view of assets and liabilities and has been addressing these in kind.”
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The analyst added that the commodity tailwind is significant enough, with net debt seen falling to $3 billion by year-end on the firm’s baseline estimates, that BP will be able to reduce its total obligations, redeploy capital into its core business and “redirect towards a more sustainable capital returns frame.”
BP shares fell around 2.3% on Wednesday, giving back some ground after Brent oil declined 2.3% to $105.46.
The stock is up more than 30% so far this year, buoyed by the rally in oil prices, amid continued tensions in the Middle East.
The addition to the tactical list signals a near-term positive stance, separate from Evercore’s unchanged longer-term in-line rating.
BP has been working to simplify its portfolio and strengthen its balance sheet after coming under pressure from investors over its strategy and returns.
