The Zacks Analyst Blog Highlights: BP, Royal Dutch Shell, Plains Exploration & Production, Royal Caribbean Cruises and Carnival Corp

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Sep 17, 2012, 09:30 ET

CHICAGO, Sept. 17, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include BP Plc (NYSE:BP), Royal Dutch Shell Plc (NYSE:RDS.A), Plains Exploration & Production (NYSE:PXP), Royal Caribbean Cruises Ltd. (NYSE:RCL) and Carnival Corp. (NYSE:CCL).

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Here are highlights from Friday's Analyst Blog:

BP to Divest Norwegian Assets

BP Plc

(NYSE: BP) plans to divest its non-operated interest in the Draugen field in the Norwegian Sea to an affiliate of

Royal Dutch Shell Plc

(NYSE: RDS.A) − AS Norske Shell. This $240 million, all-cash transaction is motivated by the British giant's endeavor to concentrate on its core high-margin assets with a long-term growth potential.

The deal calls for the divestiture of BP's entire 18.36% non-operating stake in the Draugen field to Shell, the net production of which averaged 6,000 barrels per day. The company expects the deal to complete by the end of this year, subject to regulatory approval.

BP reaffirmed its commitment to its Norwegian ventures that also include the start-up of Skarv and the redevelopment of Valhall. These are expected to boost its Norwegian production to more than double, reaching 60,000 barrels of oil equivalent per day. The company will continue to operate 11 licenses of its total 15 in Norway, of which 4 are currently in production.

The British behemoth is a major investor in Norway and aims to expend net $10 billion over the next five years in Norway and UK. The Skarv project is expected to generate for 25 years and will likely be an important center for BP in Norway. The project involves new floating production storage and offloading vessel in the Norwegian Sea.

On the other hand, the Valhall re-development project comprises the installation of a new platform that will facilitate in extending production from the field out to 2050. Again, the Ula field is expected to produce until 2028.

BP's ongoing negotiations are in line with its divestment program that sees the British major getting rid of its mature, non-core upstream assets to create a portfolio with stronger growth potential from a smaller base.

BP is set to divest around $38 billion worth of assets by 2013, of which it has already announced disposals of $33 billion.

Recently, the company has entered into an agreement with oil and gas producer Plains Exploration & Production (NYSE:PXP) to sell oilfields in the Gulf of Mexico for $5.5 billion.

BP carries a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

Royal Caribbean Hikes Dividend

(NYSE: RCL) recently hiked its quarterly dividend payout by 2 cents to 12 cents per share, reflecting a 20.0% increase from the prior dividend payout. This equates to an annual payout of 48 cents per share. The increased dividend will be paid on October 9, 2012, to stockholders of record as of September 25, 2012.

Following the recovery in the leisure sector, the Miami-based Royal Caribbean resumed its quarterly dividend a year ago. However, the quarterly dividend of 10 cents was lower than its prior pay-out of 15 cents a share.

Earlier in October 2008, Royal Caribbean – the second largest cruise company, suspended the payment of its annual dividend in the wake of the economic recession and high cost of raising new capital.

The latest hike brings the forward annual dividend yield to 1.62% as of September 12, 2012. Although Royal Caribbean's forward annualized dividend yield inched past the industry average of 1.54%, it lagged its closest peer Carnival Corp.'s (NYSE:CCL) current dividend yield of 2.71%.

At the end of the second quarter, Royal Caribbean's cash balance stood at $212.2 million compared with $262.2 million at the end of fourth quarter 2011. We believe that the company has enough cash and cash equivalents to provide optimum shareholder value.

With lesser ship additions in the next few years, free cash flow is expected to rise. Royal Caribbean international will decrease in capacity by 4% in 2013. Its growth momentum will not pick up before the delivery of the first Sunshine ship in late 2014. The overall year-over-year growth for the company in 2013 will be up by just over 1% which will likely lessen capital expenditure leading to higher free cash flow generation.

We believe that an increase in dividend payment amidst a sluggish industry background affirms Royal Caribbean's strong liquidity position and improved operating performance. We maintain a long-term Neutral recommendation on the stock.

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