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The Fate of BP

Screen Shot 2014-10-28 at 12.29.57…if prices remain in the region of $60 per barrel, then the current scenario would be retained for a longer period of time, exposing it to takeover bids. Also, if Royal Dutch does indeed takeover BP, it could work out well for both companies.

Extracts from an article published by GuruFocus.com on 30 Dec 2014 under the headline:

British Petroleum Is A Buying Opportunity To Explore With “Sudden Dips” 

British Petroleum remains a buy, despite being a size lower than some of its competitors mentioned above. Its market capital of £74.6 billion ($116.5 billion) is dwarfed in terms of Royal Dutch Shells £208 billion ($323.85 billion), which might put it at risk considering the strategic issues at hand. With the uncertainly looming over the entire industry, experts feel that the company might be unsafe as a medium term investment, but there are clues to express otherwise.

According to sources like Forbes and IB-Times, Royal Dutch could be in the race to bid for some of the British oil major’s assets, which might sweep ion a new wave of optimism, putting in a position of a being a “buy” company. But since no confirmation has yet come through, there isn’t a credible source of attributing optimism for a price rise for BP shares on an immediate basis.

Conclusive thoughts

The first two quarters of 2015 will determine the fate of British Petroleum. If oil prices stabilize to around the $80 per barrel price bracket, British Petroleum might experience more stability, would perhaps be able to control capital expenditures more systematically, and may not also have to incur the higher the high attrition it is doing currently, and also feel easier to pay sizable dividends to its shareholders. But if, prices remain in the region of $60 per barrel, then the current scenario would be retained for a longer period of time, exposing it to takeover bids.

Also, if Royal Dutch does indeed takeover BP, it could work out well for both companies. The reason is, from profits to costs, everything would be shared, and with the current scenario, lesser costs would mean better margins for both the companies. Comparing Royal Dutch in terms of size, their buying into BP would send their shares into a rally for a short duration of time, which if capitalized upon, will cement its position as a “buy” for some time in the future. Hence, investors should stay calm and keep watching the future moves of BP.

FULL ARTICLE

RELATED: BP ON A RESTRUCTURING SPREE

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