It was just yesterday when we found out about oil stock BP (BP) win in the Gulf of America, hitting a major new source of oil and hydrocarbons. But despite this, merely a day later, new reports suggested that BP could be the target of a takeover effort by another oil company. This move hit investors just right, and shares gained over 1.5% in Tuesday afternoon’s trading.
BP has been considered as having something of an “identity crisis” these days, and is trying to come back around by cutting its environmental spending to focus on oil and gas, its basic core businesses. That is likely coming as good news to investors, who watched as BP tried to branch out into greener pastures, but ended up with several under-performing quarters, reports noted.
Now, several oil operations—including Shell (SHEL) and Exxon Mobil (XOM)—are taking a look at picking up the company’s core operation to incorporate them into their own. Meanwhile, all those non-core assets are starting to draw attention from other companies, for whom they would be core assets. But it is clear, as far as Quilter Cheviot analyst Maurizio Carulli figures, that BP is a “potential takeover target.” Further, as Allen Good of Morningstar noted, this is a time when oil and gas are having an “existential crisis.”
Souring Financials
The news may be pretty good right now for BP, with its big new strike and plans to divest non-core assets to raise cash. But there are also some less pleasant signs involved, as recently, BP announced that its net debt was likely to rise and its gas marketing and trading earnings were expected to slip.
With plans to cut net debt down to between $14 billion and $18 billion by 2027’s end, it is clear that BP has quite a bit of debt on its balance sheets. Its plans to sell off non-core assets could really help out here, but with debt like that in play, it may prove a bargain sale for some other oil company looking to augment its position.
Is BP Stock a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on BP stock based on three Buys, seven Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 25.03% loss in its share price over the past year, the average BP price target of $31.98 per share implies 17.23% upside potential.
