Is BP’s Stock a Buy After its Legal Settlement?

E = Earnings are Increasing Quarter over Quarter

It should be noted that while BP currently claims a market cap of just $127.97 billion compared to Chevron at $198.89 billion and Exxon Mobil at $392.74 billion, its trailing twelve months revenue is $371.81 billion, beating out Chevron at $224.77 billion and fairly competitive against Exxon Mobil at $426.25 billion.

Sept. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 June 30, 2012 Sept. 30, 2012
Underlying RC profit ($) in millions 5,140* 4,986 4,799 3,685 5,179
Underlying RC profit per ADS ($) 1.63* 1.58 1.52 1.16 1.63

(*Non-underlying, standard RC profit.)

Perhaps the most notable event for the company in the third quarter is the sale of its 50-percent stake in TNK-BP to Russia’s state-owned Rosneft for $12.3 billion in cash and an 18.5 percent stake in the soon-to-be massive oil company, a position that comes with two board seats.

Production for the quarter was an average of 2.259mboe/d, flat with the second quarter but a drop of 2.7 percent from a year earlier. Production for the first nine months of the year averaged 2.328mboe/d, a drop of 5.3 percent compared to the same period last year. BP expects full-year 2012 production to remain flat with 2011 levels, meaning fourth-quarter production is expected to be high.

Underlying RC profit from upstream operations dropped 30.5 percent year over year, while underlying RC profit from downstream operations climbed an incredible 80.3 percent y/y.

The company also notably announced a quarterly dividend of $0.09 per ordinary share ($0.54 per ADS) to be paid out in December. BP has been slowly hiking its dividends since slashing them after the 2010 disaster.

E = Excellent Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing. On this metric, BP’s operational performance is relatively poor compared to its peers. BP has an ROE of just 15.56 percent compared to Chevron with an ROE of 18.96 percent and Exxon Mobil with a whopping ROE of 27.48 percent.

Operating margins are a critical indicator of health in the oil industry. However, on this metric as well BP falls short of its peers. The company has an operating margin of just 7.18 percent, while Exxon Mobil comes in at 15.97 percent and Chevron at 18.36 percent.