BP (BP) joins a growing list of oil companies looking to exit the Iraqi oil fields. Citing Iraq’s oil Minister, Ihsan Abdul Jabbar, Bloomberg reports that the oil giant is planning to sell its assets in Iraq and pull out of the Rumaila field.
Russian oil company Lukoil PJSC is also in talks with Chinese companies as it looks to offload its stake in the West Qurna-2 field. The two companies join Exxon Mobil (XOM), which also plans to sell its stake in the West Qurna-1 for about $400 million. (See BP stock chart on TipRanks)
Tough contractual terms have triggered the mass exodus by BP and other companies, reports Bloomberg. Payment delays compounded by political instability have also prompted the oil companies to consider an exit strategy.
“The existing investment environment in Iraq is inappropriate to keep the major investors. All major investors are either looking for another market or for another partner. We, as an investment environment, are inappropriate for major partners,” said Jabbar.
Amid the push by the oil companies to exit, Iraq still pumps the second-highest amount of oil among Organization of Petroleum Exporting Countries (OPEC) members. The country pumps about 4 million barrels a day of crude.
Last month, HSBC analyst Gordon Gray downgraded the stock to a Hold from a Buy and cut his price target. According to the analyst, risks in the energy industry are not going away anytime soon.
“Moreover, there are real risks that just as BP makes good progress on its energy transition strategy, the market continues to demand more in this regard from it and from its peers. Any significant investor momentum to push for absolute emissions reductions to be extended to all BP’s hydrocarbon sales (rather than just those on its produced hydrocarbons) could call much of its growth strategy into question,” Gray said.
Consensus among analysts is a Moderate Buy based on 2 Buys and 4 Holds. The average BP price target of $29.90 implies 10.82% upside potential to current levels.
BP scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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