![\"\"](\"http:\/\/www.credittrends.com\/blog\/wp-content\/uploads\/2010\/07\/BP-NPV-07-12-2010.jpg\" "\\"BP")
With BP (BP) apparantly agreeing to at least $10billion in asset sales (in addition) to the dividend omission, both acts we called for a month ago, it is again time to revisit the stock.<\/p>\n
It is quite clear that unless the price of energy rises on the order of at least 10%, or if the market perceived the ultimate cleanup\/litigation liability will be below $ 50billion, forcing us to raise the free cash flow estimates in the table (they are in per share), fair value is currently in the mid $30s for BP.<\/p>\n
However, if investors perceive risk to be\u00a0further\u00a0reduced, its US stock could rise to the upper $30s, as currently indictated by our present value\/cost of capital model. This is clearly a fluid situation with no obvious answer-unless you are a buyer of BP’s underlying assets-they are the obvious \u00a0winners thus far.<\/p>\n
Keep in mind we are also\u00a0penalizing\u00a0BP for our perceived\u00a0underfunding\u00a0of its pension plans, an issue they will need to address within the coming 12 months, a large general financial market rally aside. For now, BP is paying out a large multiple of what it is paying into its plans; we estimate such plans are at least $3billion underfunded at the end of June. This is a sensitive issue for BP having undergone costly strikes and threats of walkouts in the past resulting from pension issues.<\/p>\n