A Valuation Of BP Based On Its 4 Sources Of Value

In my last article, “Drilling for Oil in the Stock Market,” I wrote that some of the world’s largest oil companies are trading for little more than the value of their oil and gas reserves. My analysis looked at each company’s enterprise value—the value of all of the money invested in the company by both shareholders and lenders, minus the company’s cash. When an oil company’s enterprise value is the same as the value of its reserves, you essentially get the rest of the company’s assets for free when you buy the company’s stock.

Of the five oil supermajors—Royal Dutch Shell (RDS.A) (RDS.B), Exxon Mobil (XOM), BP (BP), Total (TOT), and Chevron (CVX)—analyzed in that article, BP was the cheapest on an enterprise value to reserve basis. BP is divided into four segments—its Upstream segment, its Downstream segment, its Other Businesses and Corporate segment, and its Rosneft holdings. By looking at each of these segments, we can get a better idea of what the company might be worth. (Read More)