Good news for BP PLC (NYSE: BP) — it has been reinstated with a Buy rating by the U.K. and oil and gas team at Bank of America Merrill Lynch. The 530p local market target in London implies upside of more than 11%, plus BP has the 4.9% or so dividend yield.

The Merrill Lynch team also said that BP is now one of its top picks in its global supermajor oil peer group:

We believe BP offers a combination of best in class shareholder returns, free cash flow coverage and near-term visibility on OCF recovery. And yet, BP trades in-line with Royal Dutch Shell plc (NYSE: RDS-A) at roughly a 5% dividend yield — offering almost 20% total shareholder return upside to our price objective.

The team also believes that BP’s OCF recovery is among the most visible of its peers. Dividend growth of about 8% is what the firm is looking for this year and next year.

Another positive is that BP’s expected gearing should offer further cushions in the event of falling commodity prices, or for enhanced shareholder returns. BP’s Gulf of Mexico spill is also believed to be cushioned.

Merrill Lynch did a sum-of-the-parts valuation analysis that was even higher (580p versus 530p in the target). It then took into effect the accounting for remaining legal uncertainties from its Gulf spill to get to the 530p target.

The initial opinion report from Merrill Lynch showed that the firm prefers BP and Exxon Mobil Corp. (NYSE: XOM) over their global supermajor peers Royal Dutch Shell PLC (NYSE: RDS-A) and Chevron Corp. (NYSE: CVX), which the firm has Neutral ratings on each.

Exxon Mobil Corp. (NYSE: XOM) was also raised to Buy with a $110 price target. The firm said that recent risks to production have played out. It believes that the shares are now attractively valued and that improving unit margins can lift its operating cash flow by $15 billion over the next five years.

BP shares in New York trading were up 0.9% at $47.42, and the consensus price target is $50.39 for the ADSs. Merrill Lynch put the implied price target for the New York shares at $52 in its report.

Shares of Exxon Mobil were up 0.8% at $95.50 in mid-morning trading on Thursday, while the consensus price target is about $100.

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