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BP plc Message Board

  • forty2gallonbarrel forty2gallonbarrel Jun 12, 2010 11:51 AM Flag

    Whats BP Worth?

    This analysis is admittantly rough. Take a look and let me know your thoughts. I have two big assumptions.

    1/ BP will have annual clean up, legal, and settlement expenses averaging $10 bil per year for the foreseeable future. This could be low or high, but it's my line in the sand until I learn more.

    2/ BP's liability for penalties ($4300 per barrel) will be $15 bil pre-tax and $10 bil post-tax. My calc assumes an average of 30,000 barrels spilled per day for 120 days. Some estimates show a differnt flow rate and I know that BP is collecting a fair amount today. I also know it's possible that the initital attempts at the relief well could fail and thus extend the days of spillage. In any event, this is my other line in the sand at this time. I also assume BP is the negligent party and that they'll bear this expense without the assistance of partners.

    30,000 Pretax cash flow
    (10,000) Annual spill expense (estimate 1 above)
    20,000 Adjusted pretax cash flow
    (7,000) Tax
    13,000 Adjusted post tax cash flow
    8 Earnings Multiple
    104,000 Valuation
    8,000 Add: current net working capital
    (29,000) Deduct: Debt and post retirement obligations
    83,000 Net value of the business
    (10,000) Deduct: Spillage fines, net of tax (estimate 2 above)
    73,000 Net value of the business
    3,130 Shares outstanding

    $23.32 Value per share

    At this point, I'm not a buyer of the stock and won't be until the shares hit the teens or until I learn something disproving my assumptions. Let me know your thoughts on my assumptions.

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