BP Plc: Understated Russian Resource (BP)

| About: BP p.l.c. (BP)

Buy-recommended BP plc (NYSE:BP) appears priced near our estimate of net present value of $77 a share. The estimate presumes a long-term oil price of $50 a barrel while the futures price for oil delivered over the next six years continues in a multi-year uptrend with the current quote at $72.

The oil price trend suggests we may be increasing our present value estimates before long. After taking account of first quarter 2006 results, our correlation of present value with adjusted reserve life and twelve months cash flow indicates a possible lower net present value. The reconciliation is in a table with the detail of production and reserves. A low weighted life index of 5.8 years understates what we believe to be the potential of Russian oil resources. Similarly, cash flow per barrel in Russia has not yet reached the global level. Written: April 26, 2006

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Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at kurt@mcdep.com.

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Tagged: , Major Integrated Oil & Gas, United Kingdom
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