Since the tragic Gulf of Mexico oil spill just over three years ago, life has been extremely difficult for BP (LSE: BP) (NYSE: BP.US).
Not only has it been forced to sell vast swathes of assets, it has also seen its share price experience severe volatility as the investment world has swung back and forth; from writing the company off to being optimistic about its long-term prospects.
However, I believe that BP can return to its former glory days and that, in time, Fools like me will look back and view today’s BP as a star investment.
Of course, the road to recovery will not be smooth. However, BP is making progress via increased efficiencies, cost savings and through being more ruthless with how it reinvests in the business.
Combined, this means that BP is becoming a better quality (although smaller) company that, in my view, is better placed to take advantage of the greater number of niche opportunities that, thus far, have only been exposed by smaller exploration companies such as Tullow Oil.
So, while BP may be smaller, I think that it is more niche and more able to compete with lighter-footed (and highly profitable) rivals than it once was.
However, this is not the only reason why I’m bullish on BP.
Indeed, the share price chart shows that BP is currently at the lower end of its 2013 trading range, where shares have fluctuated between 432p and 483p. Therefore, I feel that there is scope for upside in the share price should BP continue to trade within that range.
Furthermore, shares in BP continue to offer good value. They currently trade on a price-to-book ratio of just 1.1, meaning that shareholders are paying only a small amount of goodwill when buying shares in the company.
Of course, the price to book ratio may increase should BP sell off more assets, although the scale of its disposals is unlikely to mean that shares become overly expensive using this metric.
So, I’m optimistic that BP can return to its pre-oil spill profitability, with it becoming a different kind of company that focuses on higher margin, more nimble and lucrative projects in future. In addition, the 2013 share price chart indicates that shares are currently towards the lower end of their trading range, with a low price-to-book ratio backing up the view that BP is currently cheap.
