Exxon Mobil Corporation (XOM): Is BP plc (ADR) (BP) a Buy After the $8 Billion Buyback Announcement?

Page 1 of 2

BP plc (ADR) (NYSE:BP)’s shareholders should get excited again, as the company intends to return around $8 billion in cash to its shareholders in the next 12-18 months in a form of share buybacks. The share repurchase announcement was made after it had traded its 50% stake in its Russian business TNK-BP to Rosneft for $12.5 billion in cash and a 18.5% stake in Rosneft. In the past twelve months, BP has lost more than 9.2% of its total market value to land at around $42 per share. Is BP a buy after the deal with Rosneft and the stock repurchase plan? Let’s find out.

BP To Pay Massive Fine, More To Come

Sluggish share performance since Gulf of Mexico crisis

BP plc (ADR) (NYSE:BP)’s share price has been sluggish since the oil spill crisis in the Gulf of Mexico. In April 2010, BP’s stock dropped significantly from nearly $60 per share to only $27 per share, and it has stayed in the range of $37 – $44 since the beginning of 2011. BP has estimated that it would take around $40 billion to clean up the mess in the Gulf. According to BP plc (ADR) (NYSE:BP), it has paid out $10.43 billion in claims to individuals, businesses and the government. I think BP could meet the claims quite comfortably, as it kept generating consistent positive cash flow. In 2010, its operating cash flow was pushed down to the lowest level at $13.6 billion. In 2012, BP’s operating cash flow was around $20.4 billion.

The TNK-BP deal would give BP a lot of financial flexibility

Shareholders of the British oil giant should be happy after BP plc (ADR) (NYSE:BP) completes its major restructure in its Russian oil business with Rosneft. After the deal, BP will receive around $12.5 billion in cash, including about $710 million in dividends from TNK-BP, and an 18.5% stake in Rosneft. Thus, combined with the existing 1.25% stake, BP would own a 19.75% interest in Rosneft. According to the company’s recent press release on March 22, the $8 billion share repurchase is equivalent to the total investment outlay that BP invested in TNK-BP in 2003.

Highest dividend yield

In the end of 2012, BP had the total proved reserves of 17 billion BOE, while Exxon Mobil Corporation (NYSE:XOM)’s proved reserves were around 25.2 billion BOE. Chevron Corporation (NYSE:CVX) had the smallest proved reserves among the three, at around 11.35 billion BOE.

At $42 per share, BP is worth around $133.8 billion. The market values BP at only 5.74 times EV/EBITDA. However, BP has the most expensive valuation among the three. Chevron is trading around $120 per share, with a total market cap of $233.4 billion. It is valued even cheaper than BP on the market, at only 4.66 times EV/EBITDA. Exxon Mobil Corporation (NYSE:XOM) is the largest oil company among the three, with $398.8 billion in total market cap. At $89 per share, it is valued at 5.48 times EV/EBITDA.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!