BP & Partners Start Gas Deliveries To Europe; Street Sees 54% Upside

BP and a consortium of partners on Dec. 31 announced the start of commercial gas deliveries to Europe from the Shah Deniz gas field in the Caspian Sea offshore Azerbaijan via the newly-completed Southern Gas Corridor (SGC) pipeline system. Shares of the multinational oil and gas company lost 2.4% at the close on Dec. 31.

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BP (BP) has a 28.8% stake in the consortium. BP discovered Shah Deniz, its largest gas discovery to date, in 1999.

The start of gas deliveries through the final section of the SGC stretches 3,500 kilometres from Azerbaijan to Europe. The Shah Deniz field marks the starting point of SGC, which was built to deliver Caspian energy resources directly to European markets for the first time. The field is expected to supply 16 billion cubic meters of gas to markets in the region and Europe via SGC.

“This is an historic milestone, with Azerbaijan and Europe now connected with a direct, safe and reliable energy link, that again demonstrates that together we can deliver the most complex mega-scale projects successfully,” said BP’s Gary Jones.

On Dec. 15, Raymond James analyst John Freeman raised the stock’s price target to $30 (46% upside potential) from $28 and reiterated a Buy rating.

Meanwhile, Morgan Stanley analyst Martijn Rats upgraded BP to Hold from Sell on Nov. 2, citing the company’s increased dividend yield of 8.1% and as he sees negative factors as being “discounted”.

Rats’ previous cautious outlook on the stock was due to the company’s “uncertain earnings and cash flow outlook”. (See BP stock analysis on TipRanks)

From the rest of the Street, the stock scores an analyst consensus of a Strong Buy based on 4 Buys and 1 Hold. The average analyst price target of $31.50 implies upside potential of 53.5% to current levels.