Are BP plc, Sirius Minerals plc and IGAS Energy plc the buys of the century?

The right mindset

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The Gulf of Mexico oil spill of 2010 was an all-round disaster, but for BP(LSE: GKP) there was something of a beneficial unintended consequence. The necessity to slim down the business, making asset sales when the oil price was riding high, and focusing on efficiencies and careful capital allocation, meant that management already had the right mindset as the business went into the subsequent oil slump.

Brent crude has recovered from its sub-$30 a barrel low of earlier this year, to a current $50 or so. But, while BP's shares are also up somewhat, they remain at depressed multi-year levels. Big gains could be in store for long-term investors, particularly those reinvesting the generous dividend that BP is intent on managing the business to maintain.

At a current share price of 362p, BP's yield is a hefty 7.4%. The compounding effect of reinvesting that level of dividend over many years is not to be underestimated. So while dividends are never 100% guaranteed, BP looks an appealing buy for investors with a long-term horizon.

An interesting prospect

Shares of Sirius Minerals(LSE: SXX) are currently trading at 18.75p, some 22% below their 24p level of this time last year. It's odd to think that back then Sirius had not completed the planning approvals for its North York Moors potash mine, and that now that it has, the shares are not higher, but lower.

We might note that the number of shares in issue has increased over the period, so that while the shares have declined by 22%, the value of the company (market capitalisation) is only 17% lower. But this discount still appears attractive, particularly considering that the planning aspect of the project has been de-risked.

Of course, investors are now looking to matters of financing, and the execution risk of completing the project on time and on budget. Certainly there are risks in these areas, but this 100-year-life project is ideal for long-term debt funding, and management has said that while there will be equity dilution, it intends to keep this as low as possible. Sirius remains a relatively high-risk investment at this stage, but looks to be one of the more interesting prospects at the speculative end of the spectrum.

Decidedly iffy

Shares of UK onshore firm Igas Energy(LSE: IGAS) opened this week at 14.75p and are currently trading over 30% up at 19.25p. A fracking approval for another company at the start of the week drove Igas's shares up, and they've ticked a little higher since the company's AGM and trading update on Wednesday.

However, Igas has stacks of debt, and the fact that its secured bonds are trading at just 61 cents on the dollar is an indication that the company's financial condition is decidedly iffy. Indeed, despite the recent rally in the oil price, there was no positive amendment in the company's AGM statement to the position management had stated in March's results that its financial condition represented "a material uncertainty that may cast doubt upon the Group's ability to continue as a going concern".

Due to the risk of a restructuring that would be detrimental to equity holders, Igas has been on my "avoid" list for some time. Nothing this week has changed that, and if owned the shares myself I would be inclined to take advantage of the recent rise to sell.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended BP. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.