BP plc (ADR) (NYSE:BP) (LON:BP), the British multinational oil and gas company is improving on its strategic repositioning to enhance its operating and capital efficiency that would create value to shareholders, according to analysts at Oppenheimer.

BP

Oppenheimer analysts, Fadel Gheit and Robert Du Boff noted that BP plc (ADR) (NYSE:BP) (LON:BP) is the most exposed to economic sanctions on Russia than its peers in the energy industry given its ~20% equity stake in Rosneft’ NK OAO (MCX:ROSN) (OTCMKTS:RNFTF).

According to them, the company’s growth is subdued by the economic sanctions and litigation. Rosneft is included in the official list of sanctioned companies and individuals released by the U.S. Department of Treasury.

BP owns ~20% equity stake in Rosneft

BP plc (ADR) (NYSE:BP) (LON:BP) earned $1 billion from its stake in Rosfnet’ NK OAO (MCX:ROSN) in the second-quarter this year compared with $220 million in the same period a year ago. The increase in its earnings was primarily due to foreign exchange impacts. On July 22, the company received $690 million in annual dividend for 2013 earnings from Rosneft.

Gheit and Du Boff noted that the share of BP plc in Rosneft’ NK OAO (MCX:ROSN) production was 988 mboed, slightly lower sequentially.

Last month, an international arbitration court ruled in favor of Yukos and ordered Russia to pay $50 billion for expropriating the assets of the former oil giant. BP plc (ADR) (NYSE:BP) believed that the ruling has no impact on its stake in Rosfnet’ NK OAO (MCX:ROSN) citing the reason that the ruling is against the Russian Federation and not against Rosneft.

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During the second quarter, BP plc wrote down $260 million on increased allocation future litigation. The company already recorded total cumulative pre-tax charge of $43 billion excluding any provision for future business economic loss claims not yet filed, processed and paid.

The analysts noted that the estimated amount to be paid from the $20 billion trust fund was $19.3 million. The pre-tax cash outflows were $170 million for the quarter. The remaining cash balances in the trust and qualified settlement funds were $6.3 billion.

Financial condition/ asset sales

BP plc (ADR) (NYSE:BP) (LON:BP) completed its 38 billion divestment program. Last year, the company sold its stake in TNK-BP to Rosneft and announced its plan to sell $10 billion worth of assets by the end of 2015.The analysts suggested that the company would use the majority of the proceeds to repurchase shares.

The company generated $16.1 billion in operating cash flow during the first-half of this year, and it is confident to achieve between $30 billion to 31 billion for the full-year. The company plans to maintain its annual CAPEX in the range of $24 billion to $26 billion.

Gheit and Du Boff said, “increasing free cash flow allows BP to grow shareholder distributions through dividend growth and share buybacks.” The company repurchased $2.6 billion worth of shares since the beginning of this year. By the end of the quarter, BP has $27.5 billion cash and $52.9 billion total debt. Its shareholder’ equity was $131.9 billion for a net debt ratio of 16%.