Financial Analysis and Valuation of BP plc - Research Paper Example

 Highlights include the projected increase in population and the increasing in demand for the next twenty years which would be a favorable opportunity for the company to further increase and/or maintain profitability and shareholder value. BP was found to have the highest profitability and liquidity than average competitors. Its exploration and production activities continue to be its main drivers of profitability as found in the projected cash flows for purposes of preparing valuation using the discounted cash flow method. Undervaluation of the company stock using the DCF method is an indication that company shareholder value is expected to generate more wealth for its shareholders

The paper will explain the value derived from valuation models about the financial performance of the company and the industry analysis on whether it is doing the correct strategies to generate value. BP p.l.c. (or "BP") was founded in 1909 and incorporated in the United Kingdom.

It presently operates as an international oil and gas company with various products in not less than 40 countries. The company has two major segments: Exploration and Production, and Refining and Marketing. The first segment is responsible for oil and natural gas exploration, field development and production, transportation, storage, and processing, as well as marketing and trading of natural gas and liquefied natural gas and other power and natural gas liquids. The other segment - Refining and Marketing is into refining, manufacturing, marketing, transportation, supply, and trading of petroleum, crude oil, petrochemical products, and related services to wholesale and retail customers (Reuters, 2014a).

The oil and gas industry sector is part of the energy industry which is expected to grow heftily at least up to the year 2035 as a result of the increasing population and growing demand for energy (Annual Report, 2013). The other sources of energy are renewable, nuclear, hydro, and coal, and yet oil and oil will continue to have a big part in serving the energy requirement of the world in the next twenty years.