BP: Buy This Oil And Gas King Before It Recovers

| About: BP p.l.c. (BP)
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For all the negative press BP (NYSE:BP) received after the 2010 disaster, the company had focused much of its energy and resources on capping off lawsuits and cleaning up fines. All of the effort is finally paying off and the company is not only healing, but is beginning to excel in plays, putting more focus on production than protection.

The company recently acquired a larger stake in the Russian state oil company Rosneft Oil (ROSN.ME). Rosneft is Russia's state oil company worth an estimated $60 billion. The company is primarily engaged in exploration and production of hydrocarbons, production of petroleum products and petrochemicals, and marketing of outputs. The state holds 75.16% in the company. The deal would go through if BP can sell its interests in a private joint venture known as TNK-BP that was created in 2003. This deal will beef up BP's holdings because the company currently gets about a quarter of its global oil output from Russia.

Exxon Mobil (NYSE:XOM) is already in partnership with Rosneft and the two recently announced plans for a feasibility study for a platform capable of exploring shallow arctic waters. In August, Exxon Mobil and Rosneft signed a deal that included development in parts of the Black Sea and the South Kara Sea in the Russian arctic, where it is suspected that there may be as much as 85 billion barrels of oil.

Also joining the party with Rosneft is Statoil ASA (STO). The two are participating in four new joint ventures where Rosneft will have an equity share of 66.67% in each of the operating joint ventures, and Statoil's share will be 33.33%. Statoil ASA, which will help reach the firm's previously announced 2020 production target of 2.5 million boe/d, recently signed three drilling contracts to extend its use of three semisubmersible drilling rigs offshore Norway. The contracts involve drilling and completion on the Norwegian continental shelf as well as production drilling for several fast-track developments and are valued at $1.6 billion. BP's plans to expand in Russia as well as other exploration plays, coupled with the company's tenacity to wipe off the Deepwater Horizon debt are signs that BP is coming back strong. I believe this to be a company to own now and stay with for the long, profitable ride.

BP is cleaning up its act, both literally and figuratively. The company has taken it on the chin selling off massive amounts of assets in order to build a money chest for paying for things related to the Deepwater Horizon spill. The company's reputation is back on track and the company is on course to become even greater than before.

BP recently announced that it finally sold off its Texas City refinery for $2.5 billion. The company is getting closer to reaching its divestment goal of $38 billion in sold assets in order to pay down litigation fees, safety violation fines, and a multitude of lawsuits. Marathon Petroleum (NYSE:MPC) purchased the refinery, which turns 475,000 barrels of oil a day into petrol and jet fuel and is the third largest in the U.S. Marathon Petroleum is buying the refinery for $598 million, plus $1.2 billion in inventory and a $700 million provision during the next six years.

BP also recently agreed to a joint venture with Harvest Pipeline Company to build a truck-to-barge system on the Ohio River for transporting crude oil produced in the Utica shale oil play to refineries for processing. Marathon Petroleum has two refineries near this play, one in Canton, Ohio and one in Catlettsburg, Kentucky. Out of the $38 billion charge BP took related to the Gulf of Mexico disaster, it has so far spent more than $8 billion in claims, $14 billion in cleaning up the oil spill, and agreed to a settlement with the a representative for affected individuals and small businesses of roughly $8 billion.

Earlier this summer, BP agreed to sell its interests in the Jonah and Pinedale upstream operations in Wyoming to Linn Energy, LLC (LINE) for $1.025 billion in cash for the assets. Linn Energy is big in the Anadarko Basin/Granite Wash play known as Hogshooter, drilling nine operated horizontal wells in the third quarter 2012. The company owns about 95,000 net acres in the Granite Wash and has drilled 12 Hogshooter wells with an average initial production rate of 2,110 bopd, 528 bpd of NGLS, and 3.4 MMcf/d of natural gas. Under the agreement BP sold its operations center in Sublette County, Wyoming, and all of its working interest in approximately 260 operated wells with recent net BP natural gas production of 80 million standard cubic feet equivalent of gas a day, and non-operated wells with recent net BP production of 66 mmscfe/d.

In addition to the asset selling frenzy, BP has been gradually ramping up production efforts at existing and new plays. Recently, it was announced that when a second stage of the project come online in 2017, the company could end up pumping a lot more gas than was originally planned at the Shah Deniz offshore gas field. Both BP and Norway's Statoil each hold a 25.5% stake in the field that is already producing gas from its first stage and has more than 1 trillion cubic meters of gas in place now. Also, BP just this month signed production sharing contracts for three deepwater exploration blocks offshore Uruguay. The company was the successful bidder in Uruguay's second offshore licensing round in March 2012. The contracts cover blocks 11 and 12 in the Pelotas basin and block 6 in the Punta del Este basin off the Uruguayan coast, southeast of Montevideo, in water depths ranging from 50 to 2000 meters. BP will hold a 100% interest in the blocks and the Uruguayan state oil company, ANCAP, will have a right to participate of up to 30% in any discoveries.

BP reported second quarter 2012 earnings of 0.101 per share, under-performing last year's second quarter results by 67.83%, and the company had second quarter 2012 revenues of $93.34 billion, 0.74% below the prior year's second quarter results. While not a complete dismal picture, investors do expect better and better is coming. As CEO Bob Dudley stated regarding the second quarter results, "We recognize this was a weak earnings quarter, driven by a combination of factors affecting both the sector and BP specifically. The effects of price movements have impacted our earnings in the quarter. Our extensive turnaround and maintenance program, which will continue into the third quarter, is also affecting some aspects of our near term results. All of this will take time, but it is an important investment that will enhance safety and reliability for the long term. As we deliver this major transformation, we are also committed to generating sustainable efficiencies in our operations. Rebuilding trust with our shareholders and other stakeholders is vitally important. We are making progress against the critical strategic and operational targets we have set ourselves and are confident that this will deliver long-term, sustainable value."

As the company transforms, I believe this is the perfect time to become an owner of a winner that has a great strategic plan led by a great management team.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.