RBC Capital Markets downgrades BP after strong performance
RBC Capital Markets downgraded its recommendation on shares of oil giant BP to 'outperform' from 'top pick' on Tuesday following a recent strong performance on an absolute basis and versus the sector.
The Canadian bank, which maintained its 625p price target, said it remains constructive on the company's medium-term growth profile and improving cash flow framework. However, given the recent strong performance, there is now less valuation upside.
"A combination of recent strong performance, more modest expectations on the downstream and a narrowing valuation discount versus peers leaves us with lower conviction on BP shares at these levels," it said.
RBC said the medium-term investment case remains compelling, "as upstream production volumes grow by 20% over 2018-22E, BP continues on its downstream growth strategy, and Macondo charges slowly reduce leaving BP with an improving financial framework".
"We see upside to shareholder returns provided BP can deliver on its asset sales programme over 2019-20, with debt reduction being the near term priority. We see these attractions as more recognised by the market, with BP outperforming all of its super-major peers in recent months."
At 1120 BST, the shares were down 0.6% to 566.50p.