BP has overcome the biggest setback in its history to put itself in a position t o reward shareholders with strong fundamental

growth once more, says The Share C entre s Graham Spooner. The oil giant lost 53 per cent of its value in the two months that followed the Macondo disaster. The Deepwater Horizon explosion caused the largest spill in th e petroleum industry s history but Spooner believes that recent moves by BP s management should secure its future. "BP is still in the realms of transforming itself from the company it was prior to the Gulf of Mexico oil spill," he said. "It plans to sell off more low-return ing assets and invest in those which have higher growth opportunities. Growth se ekers will be pleased to hear the company plans to invest $45bn in future projec ts." The stock has been out of favour among much of the industry following two tumult uous years that saw it cut its dividend and put it in the firing line of US poli ticians. However, it has been a long-time favourite of M&G Recovery's Tom Dobell. The FE Alpha Manager believes the company, which was built to be profitable when oil is just $60 a barrel, believes the road to recovery can still be a profitable one, provided the management can resolve the legal issues and avoid becoming a targe t of competitors. Speaking to FE Trustnet last month he said: "The valuation of the business shoul d imply a share price greatly higher than it is at now and unless the management gets its act together reasonably quickly, it is going to become lunch for someb ody else in the industry." Spooner claims that BP has now staved off this threat with a series of major upg rades that have all boosted the share price. "2011 was a year of consolidation for BP and it has now set itself on a recovery trajectory," he said. "Dividends have been reinstated and between now and 2014 it expects to return to production in the Gulf of Mexico." "It also aims to continue growth of downstream operations earnings momentum, imp rove the margin mix of the portfolio, reduce uncertainties on the Gulf of Mexico liabilities, upgrade the Whiting refinery and complete 15 major upstream projec ts. Should these projects succeed, operating cash flow could improve by 50 per c ent." Data from FE Analytics shows that the stock has lost more than 13 per cent over the last 18 months. BP has so far struggled to gain a foothold as uncertainty ov er its future still dominates its valuation. However, Spooner believes BP's recent decision to sell its 50 per cent stake in TNK-BP, the joint venture with Alfa Access Renova and a consortium of Russian bi llionaires, is likely to pave the way for some serious investment in the busines s. "TNK-BP is a significant asset; it represents 30 per cent of BP s total production a nd paid out $3.75bn in dividends to BP in 2011, compared to the $4.1bn BP paid o ut to its shareholders." "The cash generated from the sale would have many uses; it could either be retur ned to shareholders or used to pay off debts or held back for other projects. Th e new business should then be smaller but more streamlined, allowing it to focus on recovery from the Gulf of Mexico disaster." He added: "We believe that BP will achieve the much needed turnaround and should achieve a fair price for TNK-BP. With the recent pull-back in the share price, there is now more value to be had for long-term investors and we are therefore u pgrading our recommendation to a buy ." Our data shows that 385 of the 3,186 funds in the open-ended universe or 12 per ce nt list BP in their top-10 holdings. FOLLOW US: http://bpholdings.wordpress.com