3 Reasons Why BP Stock Is a Great Buy

Oil prices have plummeted over the past year and the current price per barrel is flirting with 15-year lows. BP plc (ADR) (NYSE:BP) stock has taken a beating along with the rest of the global oil giants.

BPDespite this, BP is committed to its shareholders and is positioning itself to weather the storm. And investors may want to give BP stock the benefit of the doubt.

Here are three reasons why BP stock is a juicy buy.

BP Stock is Cutting Costs

BP execs have taken the market’s temperature and are acting prudently. Preparing for oil prices to hover around $50 per barrel, BP recently announced they’re slashing capital spending by over $2 billion. In addition, BP just laid off hundreds of employees and plans to reduce its workforce even further. And for the 80,000 employees that do stick around, execs just announced that their wages will be frozen. The fact that the company is laser focused on keeping costs low is sure to improve profitability, and the performance of BP stock as a result.

BP Scraping Every Barrel for Extra Bucks

BP is still negotiating the settlement from the Deepwater Horizon disaster in 2010 and could face as much as $14 billion in fines, but BP stockholders will be pleased to learn that the company has raised over $40 billion by selling assets. Chevron Corporation (NYSE:CVX) and ConocoPhillips (NYSE:COP) have purchased stakes in two promising finds in the Gulf of Mexico and to raise additional funds, BP recently announced a major sale of the Amsterdam Oil Storage terminal. This massive facility holds over a million cubic meters of fuel for distribution throughout Europe. Analysts predict the sale will generate between $200 and $400 million extra cash. Even if a billion-dollar settlement comes down, BP stock is well-capitalized for both paying its obligations and positioning itself for future growth.

BP Stock Stacks up Well vs. Competitors

Compared to competitors Exxon Mobil Corporation (NYSE:XOM) and Chevron, quarterly revenues have suffered the least. And while BP has a slightly elevated price/earnings to growth ratio of about 2.6, but compared with negative growth rates for competitors XOM and CVX,investors in energy stocks should actually find BP stock attractive.

And as for performance, while energy funds like Fidelity Select Energy Portfolio (MUTF:FSENX) and Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) seem like good plays, BP is crushing them over the past month, up 13% versus 3% for the Fidelity fund and a loss of 1% for XLE.

Bottom line, oil prices just can’t stay this low forever. We’re still decades away from living oil free and with BP doing everything they can to promote shareholder confidence, the time to buy is now.

As of this writing, Scott Michnick did not hold any interest in the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/bp-stock-oil-prices/.

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