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BP Signs Agreement With Lundin Energy to Form an E&P Firm

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BP plc's BP Norwegian joint venture, Aker BP, announced plans to acquire the oil and gas business of Lundin Energy in an effort to create a combined exploration and production (E&P) company.

The companies intend to form the largest listed E&P company focused on the Norwegian Continental Shelf. The transaction involves a cash consideration of $2.22 billion and about 272 million new shares assumed from Aker BP.

The combined entity will have an exceptional asset base, industry-leading operating costs, and a lower carbon footprint with increased and sustainable dividends. The company will produce more than 400,000 barrels of oil per day. Also, the merged firm would have a resource base of 2.7 billion barrels of oil equivalents with significant development prospects.

The merged company will operate six major production hubs and will be the second-largest owner of the massive Johan Sverdrup oil field. It will be a leading E&P company globally in relation to low costs and emissions, and will be well-positioned to capture profitable growth by engaging in major field development projects.

Once the deal closes, Lundin Energy shareholders will hold a 43% economic ownership in the combined company, while shareholders of BP will own a 15.9% ownership interest. BP and Lundin Energy also cited that the merger could result in operational synergies of up to $200 million per year from improved operations, exploration cost reductions and organizational optimization.

The transaction, subject to regulatory approvals, is expected to be completed in the second quarter of 2022.

Company Profile & Price Performance

Headquartered in London, the U.K., BP is a fully integrated energy company, with a strong focus on renewable energy.

Shares of the company have underperformed the industry in the past three months. The stock has gained 2.2% compared with the industry's 5.5% growth.

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Zacks Rank & Key Picks

BP currently has a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Sunoco LP SUN is a master limited partnership that engages in distributing motor fuel to roughly 10,000 customers, including independent dealers, commercial customers, convenience stores and distributors. In the United States, Sunoco is among the largest motor fuel distributors in the wholesale market by volume. In 2020, the partnership sold 7.1 billion gallons of motor fuel.

The company's earnings for 2021 are expected to surge 743.4% year over year. SUN currently has a Zacks Style Score of A for both Value and Growth. For 2021, Sunoco expects fuel volumes of 7.25-7.75 billion gallons, indicating a rise from the 2020 level of 7.09 billion gallons.

Canadian Natural Resources Limited CNQ is one of the largest independent energy companies in Canada. CNQ has a broad portfolio of low-risk exploration and development projects with a strong international exposure that yields long-term volume growth at above-average rates. As of the end of 2020, CNQ had 12.106 billion oil-equivalent barrels (BOE) in its total proved reserves.

Canadian Natural Resources' earnings for 2021 are expected to surge 1,085.4% year over year. CNQ currently has a Zacks Style Score of B for both Growth and Momentum. The company raised its dividend by 25% in November, reflecting strength in its cash flows. CNQ is counted as a 'Canadian Dividend Aristocrat' with an attractive yield. Furthermore, Canadian Natural Resources has a solid track record of dividend hikes, increasing its payout for 22 consecutive years.

PDC Energy PDCE is an independent upstream operator, which engages in the exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present form following the January 2020 combination with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020-end, PDC Energy's total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

PDC Energy's earnings for 2021 are expected to surge 286.2% year over year. PDCE witnessed five upward revisions in the past 60 days. PDCE beat the Zacks Consensus Estimate in the last four quarters, with an earnings surprise of 51.06%, on average.


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BP p.l.c. (BP) : Free Stock Analysis Report

Sunoco LP (SUN) : Free Stock Analysis Report

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PDC Energy, Inc. (PDCE) : Free Stock Analysis Report

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