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BP 2012 1Q Financial Analysis

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

British Petroleum 2012 1Q results is average. Revenue has slightly increased compared to Q4 from 93,4 bn.$ to 94 bn.$ since seasonality has low impact to companies results. Net Income before depreciation has decreased from 10,8 bn.$ to 9,2 bn.$ but profit remains quite good. 4Q profit was influenced by positive effect of 4 bn.$ from gulf of Mexico provision decrease. So earnings at Q4 was ~7 bn.$ and as all oil sector companies showed decrease during Y2011. So taking that into consideration companies earnings are quite good at Q1.

Companies revenue is driven 32% by sales in US. Sales in Europe is around the same as us ~1/3 with most strongest positions in UK. Since Europe will mostly fall into recession in Y2012 this will have some negative results on companies results. Companies main earnings come from Downstream, as this segment is less influenced by oil price as they only take their margin in refining and selling fuel at petrol stations this is good for long term results. In general companies results are slightly positive.

Balance sheet is steadily improving after downfall at Q3 2010 due to Mexico gulf spill. Till then companies equity level was over 43, after it has decreased to 35%. Since then Equity level has stably increased and now it has reached 39% which is quite good level. If if will increases to somewhat near 50% that could be considered as a good ratio. Liquidity ratio has increased over 1,2 which is acceptable. After the spill it has decreased below 1 which was dangerous, but company managed to comeback.

Return on equity is over 20% which is also quite good result. Dividend payments is 1,2 bn.$/quarter or just ~15%. Most of money went to long term property investments which took 8,5 bn.$/quarter. Company has issued new shares rather then buyback old ones for the company this is good, for investor bad as companies profit will have to be shared with more other. In general companies balance sheet is average.

Share value:

Equity / share 119,2 bn.$ 3,163 bn. 37,7 $/sh.
Market value 38,2$ +0,5 $ 0 years
Year Net income before Depreciation 36,3 bn.$ +11,5 $/sh. 30%

Companies share basic value is ~38$ which is the same as current market price (!). This makes companies share value very undervalued. Share profitability (Share market price/Net income before Depreciation) is 30% which very good compared to other companies.

Company announced that it has increased dividends by 14% from 0,42$/quarter to 0,48$/quarter or ~5% dividend yield which is very good, with dividend payout ratio only ~16% which is also very good level.

Companies such low share value could be connected to Mexico gulf spill but this was already calculated in 24 bn.$ loss at Q2 2010, figures does not provide any other negative information. Even if 20 bn.$ more loss would appear, still that would be only ~0,6 year of companies earnings and companies like Chevron has 2 years earning add-on and ExxonMobile has 4 years of earnings added to their share price and their risk is not very different from BP except maybe larger market in Europe, but still that not that much.

Analysis source: BP 2012 1Q financial results

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.