BP PLC (LSE:BP.) new discovery offshore Brazil could be worth somewhere between $10 billion and $20 billion, according to analysts at Citi.
The American bank’s early view of the Bumerangue find, which BP earlier this week described as its best for 25 years, would see it worth the equivalent of 11 to 22% of the oil major’s market capitalisation.
Nevertheless, the reaction of BP investors has been somewhat low-key.
The shares are up around 6% in recent days, thanks to in part to the discovery, but mostly because of BP’s interim results, which on Tuesday beat expectations.
“On the one hand, the market's ambivalence to the game-changing possibility of BP's Bumerangue discovery in Brazil is hard to understand,” Citi said.
“On the other, we have seen this time and time again in energy equities that it pays (for equity investors) to be a fast follower on exploration success on the adage that the market is slow to comprehend the potential.”
On Wednesday, RBC's Biraj Borkhataria called it “early days” for BP’s turnaround and noted that the oil major’s debt challenges linger.
“As the company looks to rejuvenate its upstream hopper, we expect the next iteration of capital allocation to shift further towards the upstream,” the analyst added.
“In the meantime, BP ultimately needs to execute on asset sales to reduce its debt and lease balance.”