The supply of oil is going down , no matter what anyone tells us.
BP is into alternative energy big time ! Wind energy is just one form of energy they have invested heavily in.
In February 2009, BP formed a joint partnership with Verenium to build a cellulosic ethanol plant by 2010 and start producing ethanol by 2012. Through the partnership, BP and Verenium will be able to produce and sell biofuel products that can be mixed with gasoline to produce less-polluting fuels. The biofuel market has the potential to increase 6 times its 2007 levels by 2022 due to U.S. Federal mandate .
BP recently sold assets that account for 2% of its production for $7 billion. While many investors agreed that Apache paid a slight premium for these assets, the sales suggests that BP's exploration business could be worth about $350 billion. However, the entire company's market value was $127 billion in early August 2010. While 2010/2011 have the potential of being a more risky period for BP's equity investors, its stock price suggests the company its trading for a cheap price relative to the potential value of only its E&P assets.
At a coverage ratio of 30:1, with significant cash, net income and free cash flow, while near all time lows, this company is a classic Graham & Dodd value play. Buy and own it.Think Exxon just after the Valdez incident. "Buy when blood runs in the streets", as Rothschild said during the communard strikes in 1874 Paris. BP gets a tax writoff for the $7B pre-funding to the $20B federal slush fund and saves taxes on the dividends it will not be paying this year - to the tune of another $750M. They are no fools. They can raise $10B in an afternoon by selling off one leasehold. Look at the financial pages of this website. This is one of the strongest balance sheets you can own.
The recent discovery of a 'giant' oil field in the Gulf of Mexico is a very important boost to BP long term prospects considering how they are able to add to their oil reserves at a time when many major oil companies’ holdings continue to be depleted.
Let’s say 1 billion barrels of oil were recovered from the Tiber field in Mexico. If that oil were valued at only $15 per barrel, it could be worth over $11 billion to BP, if it can just navigate the challenges of developing the field.
We are at or past an oil supply peak. New discoveries are not replacing oil at the rate it is being used. Oil prices are low (if one considers 6-7 times the price as of a few years ago low) now due to a lowering of demand and reductions by OPEC in production. Both increased demand due to better economic conditions and depletion of current in-ground oil inventory with an insufficient rate of replacement are reasons to expect oil prices, and BP's profits to rise over the next few years.