Selling US wind assets
BP plc (ADR) (NYSE:BP) announced the sale of its US wind energy assets as a part of its strategy to focus on oil and gas sector where the company expects greater margins to lie. The sale is also a part of a program to raise funds in order to cover the liabilities from the 2010 Deepwater Horizon spill in the Gulf of Mexico. BP plc (ADR) (NYSE:BP) also plans to sell its solar energy business.
Competitive analysis
Looking at the competition, Exxon Mobil Corporation (NYSE:XOM) is leading over BHP Billiton Limited (ADR) (NYSE:BHP) and BP with a market capitalization of $412.62 billion. A chart is given below that compares the overall performance of the three companies.
| BP | XOM | BHP | |
|---|---|---|---|
| Market Cap: | $139.06B | $412.62B | $184.03B |
| Revenue | $374.81B | $413.86B | $66.98B |
| Gross Margin | 11% | 30% | 76% |
| Net income | $22.68B | $71.86B | $9.61B |
| EPS | $7.10 | $9.83 | $3.60 |
| P/E | 6.13 | 9.44 | 19.22 |
BHP Billiton Limited (ADR) (NYSE:BHP) is the world’s largest mining company. It is venturing into oil and gas exploration and production segment. In 2011, BHP Billiton Limited (ADR) (NYSE:BHP) bought Petrohawk Energy Corp. (HK) at a cost of $12.1 billion in cash. The company acquired $17 billion of production and exploration assets in 2011 due to which it became the largest U.S. oil and gas player. Recently, the company appointed a new CEO, Andrew Mackenzie, who is well suited to run the company smoothly in the current macro environment. The new CEO is planning to cut capital expenditure and is focusing on returning cash to shareholders.
Exxon Mobil Corporation (NYSE:XOM) is the largest oil and gas trading company in terms of market capitalization. In the past few years, Exxon Mobil Corporation (NYSE:XOM) rewarded its shareholders well by repurchasing shares and increasing dividends. In the first quarter, it distributed $7.6 billion to shareholders through share repurchases and dividends. Exxon Mobil Corporation (NYSE:XOM) reported an increase in profit due to the strengthening of its chemical business. The company declared a dividend per share of $0.57, up 21% year-over-year. It is currently trading at $90.69 and is very near its 52-week high of $93.48.
Summary
Despite the lower net income, BP demonstrated a strong trading performance in the first quarter of 2013. The uncertainty regarding the Deepwater Horizon accident makes BP a high risk investment, however. Any news about the Deepwater incident will greatly affect the share price. As a result, I would recommend the existing investors to hold on BP’s stock.
Red Chip has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article A Look into British Petroleum’s Future originally appeared on Fool.com is written by Red Chip.
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