Value Mole's  Instablog

Value Mole
Send Message
I am an individual investor that has spent 8 years on Wall Street and now resides in Shanghai, China. I manage my own portfolio only and my goal is to help all individual investors also become comfortable managing their own money. I focus on value stocks.
  • What's BP Worth....$42 Per Share! 0 comments
    Jul 4, 2012 6:57 AM | about stocks: BP, XOM, CVX, COP

    Actually, based on our analysis, BP is worth $39.11 - $44.45 a share. We took the average which is approx $42. Here's how we came to our analysis, based on applying industry average multiples (see www.valuemole.com for explanation of multiples).

    BP is a large, cap intetrated oil company, similar to Exxon (NYSE:XOM), Chevron (NYSE:CVX), and Conoco Phillips (NYSE:COP). We took the average of these three for the industry multiple, which came out to 9.3x 2010E P/E.

    Next, we applied the industry multiple to BP's 2010E EPS to arrive at an implied price. We also applied XOM's multiple of 10.3x, given BP is most similar to XOM in terms of size, growth, oil reserves, future projects, etc.

    We then took out the cost of oil spill, which based on recent 2Q10 BP earnings is estimated at $32.2 billion. That then got us to a implied range for BP of $39.11 to $44.45 per share.

    Conclusion:

    If you don't own BP, an arbitrage profit of 10% (BP current price and implied price of $42) is probably not worth the risk. If you want to go long oil, just buy one of the other integrated oil companies.

    If you currently own BP, it's worth holding on to until prices get closer to $42 per share. Once it does, then there is no longer an arbitrage play between BP versus other integrated oil companies, and we'd recommend you sell BP and just own XOM.

    Disclosure: Position in BP

    Stocks: BP, XOM, CVX, COP
Back To Value Mole's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • MCD trades at 14.7x P/E, 3.3% dividend, real estate value $30bn (30% of market cap), recession resilient. Bought recently at $88.00.
    Jul 4, 2012
  • BBRY trades at 8.6x 2010E P/E (adjusted for net cash fo $6 per share). With 41% market share of smart phone, is RIMM a deep value play?
    Aug 9, 2010
  • Is HPQ a Buy now? Go with positions in DELL (for hardware) and IBM (for services) instead.
    Aug 8, 2010
More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.