The Zacks Analyst Blog Highlights:BP, Royal Dutch Shell, Walgreen, Express Scripts and BioScrip

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Sep 20, 2012, 09:30 ET

CHICAGO, Sept. 20, 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), Walgreen Co. (NYSE:WAG), Express Scripts (Nasdaq:ESRX) and BioScrip (Nasdaq:BIOS).

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Here are highlights from Wednesday's Analyst Blog:

BP Norwegian Oilfield Shut After Leak

BP Plc (NYSE:BP) said that it has shut down a Norwegian oil and gas field, Ula, following a substantial oil and gas leak on its production platform. The embattled British giant, who is struggling to restore its reputation following the disastrous 2010 Gulf of Mexico (GoM) oil spill, stated that it will not resume production until the causes of the occurrence have been determined and the conditions restored.

On September 12, considerable amounts of hydrocarbons escaped into the Norwegian waters of the North Sea. According to the Norwegian Petroleum Safety Authority, or PSA, the leak took place in the separator module on Ula's production platform.

The facility was automatically shut down six days following the incident. Although BP evacuated the workforce to the neighboring drilling site, PSA believes the event could have taken dangerous proportions. The company had already initiated its own investigation but pointed out that it was too early to determine the amount of the spilt oil.

The Ula field − located in the southern part of the North Sea − achieved 317,500 barrels of oil, or about 10,200 barrels per day, in July as per the Norwegian Petroleum Directorate. Ula is a comparatively small and mature oil field and BP operates it with an 80% interest, while its associate partner Dong E&P Norge AS holds the remaining 20% stake.

The oil field had a peak production of 52.4 million barrels or 143,600 barrels per day, way back in 1993. However, its production dropped to an average 4.8 million barrels, or 13,200 barrels per day last year.

After the GoM oil spill in 2010, which killed 11 workers and spewed more than 200 million gallons of crude, BP is striving to improve its revenue flow. The company is confronting a trial in the U.S. for gross negligence in the most dreadful oil spill in the country's history.

Additionally, BP's second quarter earnings have been adversely impacted by the effects of price movements. Again, its far-reaching turnaround and maintenance ventures will continue into the upcoming quarter, further adding to the financial woes. We maintain our long-term Neutral recommendation on BP, Europ's second largest oil company following Royal Dutch Shell Plc (NYSE:RDS.A).

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

Another Purchase for Walgreens

Despite several recent headwinds, Walgreen Co. (NYSE:WAG) has been successful in maintaining its nonstop shopping spree. Following a gigantic $6.7 billion merger with Alliance Boots, this leading retail pharmacy chain completed its acquisition of a mid-South US-based regional drugstore chain from Stephen L. LaFrance Holdings Inc. for $438 million.

The string of mergers and acquisitions signifies the company's reliance on the inherent quality of each asset and superior demographics, which it believes would drive solid return on investments going forward.

Earlier in July, Walgreen entered into a purchase agreement to acquire this US drug pharmacy chain in order to get a hold of its 144 drug stores located in Arkansas, Kansas, Mississippi, Missouri, New Jersey, Oklahoma and Tennessee. These stores currently operate under brands like USA Drug, Super D Drug, May's Drug, Med-X and Drug Warehouse stores. Further, the acquisition also includes corporate offices and one distribution center located in Pine Bluff, Arkansas.

Walgreen believes that this acquisition will help expand its business in several key regions of the nation but rules out any material impact on its fiscal 2012 earnings per share ('EPS'). It is noteworthy that the regional drugstore chain delivered sales of $825 million in fiscal 2011.

To offset the impact of the Express Scripts (Nasdaq:ESRX) contract loss, Walgreen is currently concentrating on several strategic steps to drive growth. In August this year, the company entered into a strategic partnership with a global international pharmacy-led health and beauty group Alliance Boots GmbH, in which it acquired a 45% stake for $6.7 billion. The company also has the option to attain 100% ownership over the next three years for an approximate value of $9.5 billion in cash and stock.

In May, Walgreen completed the acquisition of certain assets of BioScrip's (Nasdaq:BIOS) community specialty pharmacies and centralized specialty and mail service pharmacy businesses that include a national network with 30 locations in 16 states across the US and the District of Columbia, primarily serving HIV, oncology and transplant patients.

At the same time, Walgreen also acquired certain assets of BioScrip's traditional mail service pharmacy business that dispenses prescriptions for drugstore.com, which was acquired by Walgreen in June 2011.

We are optimistic about the latest development in which, Walgreen, after a long waiting period of 7 months, has finally reached a settlement with Express Scripts. The Express Scripts contract loss was a blow to Walgreen, as the earlier contract used to contribute a significant part to its sales (12.6% of total prescriptions filled in August 2011). As a result, the company's results have been dismal since the beginning of 2012.

We expect these new ventures to boost Walgreen's growth going forward. Nevertheless, it remains to be seen if these measures can neutralize the headwinds related to the Express Scripts contract.

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