Newspaper article The Evening Standard (London, England)

Joy for Backers as $22Bn Is Set to Gush out of BP

Newspaper article The Evening Standard (London, England)

Joy for Backers as $22Bn Is Set to Gush out of BP

Article excerpt


BP SHAREHOLDERS have enjoyed some pretty spectacular returns, so far this year but the message going out from the Square Mile is: they ain't seen nothing yet.

Third-quarter numbers this week failed to live up to some of the City's more demanding forecasting with the clean net income of $5.3 billion ([pounds sterling]2.9 billion) dented by the effects of the disruption in the Gulf of Mexico caused by hurricanes Katrina and Rita. Production levels also felt short of targets but US broker Morgan Stanley is urging clients to sit tight,and is forecasting a $22 billion cash bonanza, or almost 10% of BP's current stock market value, next year.

BP has already indicated that it will return the $8 billion proceeds from the sale of Innovene via an extension of the current buyback programme. At the same time, Morgan Stanley has increased its estimate of the company's buyback programme to $14 billion, which after you throw in a further $7.6 billion of dividend, bolsters the final payout to shareholders to almost $22 billion.

Morgan Stanley says there has not been any fundamental change in the outlook for energy that would lead it to change its positive view of the industry.

"The recent sell-off in the shares appears to us unjustified and an opportunity to increase weightings," it adds.

The broker has repeated its equal-weight rating and reckons there may be better value to be had elsewhere in the oil industry.

Shares in the big mining companies provided the impetus for the rest of the market yesterday. Anglo American led blue-chips higher on the back of a bullish trading update.

Broker UBS raised its recommendation on the shares from neutral to buy and lifted its share price from 1600p to 1850p.

Marks & Spencer came off the boil in the wake of Tuesday's strong run. Even so, the shares continue to trade at a small premium to the 400p that billionaire Philip Green was prepared to bid last year. Their current strength has mystified traders although some support has been attributed to the struggling clothes retailer's recovery prospects. …

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