BP plc (BP) is well on track to complete its $30 billion assets sale by end-2011 in order to meet the Gulf of Mexico (GoM) spill costs. Yesterday, the company said that it will sell the Malaysian petrochemical assets for $363 million. The assets include 15% stake in Ethylene Malaysia and 60% interest in Polyethylene Malaysia.
The distressed European oil major is presently seeking cash. It has already sold oil and gas fields in North America and Egypt to Apache Corp. (APA) for $7 billion and assets in Colombia to Ecopetrol SA and Talisman Energy Inc. for $1.9 billion. However, BP will continue to focus on development programs in the emerging countries such as China and India.
Though the company has actively been engaged in asset disposal programs, these account for only a minimum number of its total reserves. The second quarter production volume declined 4% from the year-earlier level, but we believe that BP’s production volumes will gradually gain traction in the near to medium term.
The GoM oil spill tragedy has definitely ruptured the basic fundamentals of BP, but its constant endeavor to fight the related consequences is gaining traction. The company expects to plug the Macondo well shortly after the completion of its relief well, which is expected sometime after the U.S. Labor Day holiday on Monday.
We believe that the recent underperformance in BP ADS is related to the negative sentiment on the delay in the relief well and uncertainities associated with future liabilities. However, disposing assets and securing new bank loans will once again help the company’s balance sheet get a better shape. Our Neutral stance remains unchanged with the Zacks #3 Rank (Hold).

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