Energy stock BP (BP) managed to hit it big in the Gulf of America, or Gulf of Mexico, depending on which orthodoxy you subscribe to. Regardless of what you call it, BP is calling it a jackpot, but investors are calling it a bit of a disappointment. Shares slipped fractionally in Monday afternoon’s trading.
The find features “…high-quality reservoirs and a potentially commercial volume of hydrocarbons,” reports noted. It also comes at a great time for BP, who is currently in the middle of a reset strategy that is focusing on growing its production of raw materials. BP wants to get up to a range of 2.3 million to 2.5 million barrels of oil equivalent produced daily by 2030.
BP’s new find is about 120 miles away from Louisiana’s coastline, with BP drilling down 23,830 feet, reports noted. It is part of the Far South project, which BP co-owns with Chevron (CVX). Having a well like this in its portfolio, meanwhile, makes it pretty clear that production growth plans are likely to go ahead.
A Bad Time for Growth?
However, there is one point that suggests maybe now was not the best time for such a find, or for such an expansion plan. BP did not make any friends among environmentalists when it “dropped its green pledges and went back to oil,” one report noted. But with the price of crude currently on a downward trend, expanding production now may only make the problem worse, and give BP few advantages.
With activist investor Elliott Asset Management getting in on the action, though, a growing portion of BP’s investor base may have something to say about exploiting a major new asset at a time when crude prices are in decline.
Is BP 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 27.95% loss in its share price over the past year, the average BP price target of $31.97 per share implies 19.83% downside risk.
