6. -40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 2010
XOI DJI
Company
Market Cap
(US$ billions)
Exxon Mobil
Corporation
337,077
PetroChina
Company
233,882
Royal Dutch
Shell PLC
196,075
Chevron
Corporation
170,639
Petroleo
Brasileiro S.A.
141,745
OAO
Gasprom
133,134
BP PLC 125,937
2005-2009 Weekly Market Performance for Dow Jones and Major Oil Index
7. Competitive Advantage Differences
• Focus is on ownership of oil rights
and oil assets
• Limited operational exposure
• Tight cash management policies
• Disciplined approach to investments
• Culture – profit driven, standardized,
top down management
• More exposure to operational
roles within partnerships which
increases risk
• Accounts payable terms ~35 days
• Investments based on
opportunity
• Culture – consensus driven focus
11. The Spill
“The way that they are selling
assets and strengthening their
balance, is what you would expect
them to do if they were preparing
for a worse scenario such as a
finding of gross negligence,"
December 1st 2010
Anonymous analyst (Did not
want to be seen questioning
BP's public comments)
“As we believe the true liability for
the Macondo accident to be
nearer $25-30 billion as opposed
to the around $60 billion the
market is discounting.”
November 10th, 2010
Richard Griffith
Evolution Securities
Buy recommendation
12. 2009-2011 Gross Margins
• Crude Oil prices up $85.17 vs $78.8 or 8.1% in 2011 (US Energy Dept Fcst
11/9/10)
• 1.7% increase in World Wide consumption in 2011 (US EIA Nov-10)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2009 2010 2011
40.2%
38.9% 38.4%
29.0% 29.4% 28.9%
24.0%
4.4%
20.2%
Exxon
Exxon Adj
BP
BP has returned to profitability in Q310 with a replacement cost profit of $1.8 billion which included an additional $7.7 billion charge on top of the $32.2 billion charge taken in Q210 relating to the oil spillSocieteGenerale analyst EvengySolovyov, who rates BP shares a Buy and maintains a 12-month price target of 495 pence, said the underlying numbers look “unaffected” by the spill-related disturbances. “Adjusted for divestments and spill costs, BP’s performance remains strong,” the analyst wrote in a note.
Key takeawaysContinued growth, investing in future business and reservesJust completed merger with XTOPlan to spend $25-30B in capital investments in the next few yearsContinue strong performanceRising oil prices impact ($85/barrel in 2011 – 8% higher than 2010)
BP has returned to profitability in Q310 with a replacement cost profit of $1.8 billion which included an additional $7.7 billion charge on top of the $32.2 billion charge taken in Q210 relating to the oil spillKey TakeawaysVisibility into losses and expenses from oil spillYTD at loss, but Q3 showed profitSelling assets to raise capital - $30B in assets sold and reducing debt by $10-15BInvesting in long term assets - $18BRising oil prices impact ($85/barrel in 2011 – 8% higher than 2010)
Talking PointsIndustry outperforming DJIRisk and reward – BP is undervaluedExxon – strong analyst ratingsRecommendation –Buy and hold BP – higher risk, higher potential depending on outcome of future legal actionsExxon buy and hold