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Estimated net present value [NPV] remains $80 a share for buy-recommended BP plc (NYSE:BP), though fourth quarter 2006 cash flow and earnings reported on February 6 were below our projections.

Future growth in Russia may help justify NPV that otherwise looks high compared to that indicated by a correlation with reserve life and cash flow for some thirty companies. Prospects could be further strengthened if oil for delivery over the next six years, priced currently at $64 a barrel, resumes an uptrend by crossing above the 40-week average later in 2007.

Looking for a higher cash flow margin (Ebitda Margin (E&P)) in 2007, we presume some extra charges taken in 2006 will not recur. Price below the 200-day average confirms that BP stock remains out of favor with investors. With patience, we include BP stock at a half weighting in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean energy for global growth.

Originally published on Feb. 6, 2007

BP 1-yr chart

bp chart

Source: BP: Difficult Execution Worries Investors