BP PLC (LSE:BP.) will evidently need more than expectation-beating results and a giant oil discovery to impress Royal Bank of Canada.
In a note, it repeated its ‘sector perform’ rating (in other words, a ‘meh’ rating), albeit the bank’s target price nudges up to 470p from 450p.
RBC's Biraj Borkhataria called it “early days” for BP’s turnaround and noted that the oil major’s debt challenges linger.
“A few months removed from the Capital Markets Day and BP posted improved results, with increasing momentum on the cost front and a strong beat versus market expectations on earnings,” the analyst said in a note.
“Looking forward, as the company looks to rejuvenate its upstream hopper, we expect the next iteration of capital allocation to shift further towards the upstream.
“In the meantime, BP ultimately needs to execute on asset sales to reduce its debt and lease balance.”
BP on Monday announced the Bumerangue discovery in Brazil, a find that the oiler said was its best for some 25 years.
Then, yesterday, it beat expectations for second-quarter earnings and unveiled a larger-than-expected dividend and a new $750 million share buyback.
Elsewhere in the square mile, Citi analysts warned against overlooking the significance of Bumerangue.
Citi noted the current market apathy with exploration success, saying perhaps that some investors have a single-minded view that oil companies should only return capital.