Statement of confidence    Solid results, decent cash flow and a statement from the Board that, followingthe start- up of the latest wave of large projects, it has sufficient confidence inthe outlook for cash flow growth to remove the scrip dividend prop. What's notto like? On the back of better than expected earnings, declining Macondo cashspend and notably reduced execution risk we upgrade forward earningsestimates and with them our price target, now 545p (was 520p). Of coursecommodity volatility continues to present risk. Yet with the business placed toincrease free cash flow by c$8bn over the next three years in a $55/bblenvironment the 6% plus dividend yield feels overly generous. Buy.    Start of the inflexion    Re-instating BP as a Buy in April of this year we argued that between decliningMacondo outflows and rising project inflows BP’s cash flows should beexpected to inflect, and strongly, as we proceeded through 2017. Six monthson and six major start-ups later so that prognosis appears to be comingthrough in results. At c$1.9bn Q3’17net income was notably above marketexpectations ($1.6bn) with the cash outflow on Macondo falling sharply to$0.6bn for the quarter, a notable reduction on the prior c$2bn/quarterly runrate. Moreover, with its forward cash cycle essentially rebalanced for a $50/bblworld we can but take encouragement from the Board’s earlier than expecteddecision to offset dilution from future scrip issuance via equity buy-backs.

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