BP 's stock is rallying as oil prices have risen. After struggling for about a decade post the financial crises, the 2010 oil spill, and then the fall in oil prices in 2014, BP has posted good 3rd quarter earnings. Revenue has risen by 27% Y-o-Y while profit has almost doubled. Analysts expect profits to increase further as six of seven new upstream projects which were planned for this year are now active. The liabilities from the oil spill have also come down significantly and will reduce to about $1 billion per annum by 2019.
Additionally, BP won 2 new blocks in a promising part of the Santos basin in Brazil. While overall profits have increased, BP may face headwinds in the coming months as natural gas prices have remained flat. BP has more involvement with natural gas than with crude oil.
BPs valuation seems a little bit on the higher side, trading at a P/E ratio of 27x when compared to Exxon Mobil 's 21x and Chevron's 23x. The energy sector's industry average is about 25x. The stock is heavily dependent on oil and gas prices, which are expected to remain in the range of $50-$55. The company has announced that it will be buying back shares which were given out as dividend payments in the past few years.
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