BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F BUY December 10, 2017 BUY RATING SINCE 11/09/2017 TARGET PRICE $45.40 BUSINESS DESCRIPTION p.l.c. operates as an integrated oil and gas company worldwide. It operates through three segments: Upstream, Downstream, and Rosneft. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 10.73 9.52-0.56 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 27.57 23.30-15.73 Net Income 9.19 204.60-25.22 EPS 3.92 195.90-26.78 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 3.91 12.45 13.41 Q3 2016-4.03-4.05 11.79 Q3 2015-7.48 6.55 12.91 P/E COMPARISON Sector: Energy Sub-Industry: Integrated Oil & Gas Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $45.40 Rating History HOLD BUY HOLD Volume in Millions 46 44 42 40 38 36 34 32 30 28 100 50 0 33.60 EPS ANALYSIS¹ ($) Q1 0.85 Q2-1.91 Q3 0.02 2015 Q4-1.08 Q1-0.19 235.97 Ind Avg Q2-0.46 Q3 0.51 2016 NA = not available NM = not meaningful Q4 0.16 Q1 0.44 25.35 S&P 500 Q2 0.04 Q3 0.53 2017 1 Compustat fiscal year convention is used for all fundamental data items. RECOMMENDATION We rate () a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations, growth in earnings per share and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows low profit margins. HIGHLIGHTS 's revenue growth has slightly outpaced the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 27.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. Net operating cash flow has significantly increased by 140.19% to $6,024.00 million when compared to the same quarter last year. In addition, has also vastly surpassed the industry average cash flow growth rate of 14.39%. 's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, turned its bottom line around by earning $0.02 versus -$2.12 in the prior year. This year, the market expects an improvement in earnings ($1.77 versus $0.02). The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) 5% 30% UNFAVORABLE 10% RDS.A RDS.B CVX TOT XOM EBITDA Margin (TTM) STO PBR.A PBR SU FAVORABLE OXY 45% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $53.1 Billion and $349.8 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) 5% 30% STO UNFAVORABLE -2% Earnings Yield (TTM) OXY RDS.B CVX PBR FAVORABLE RDS.A XOM PBR.A SU TOT Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 5.5% and 29.2%. Companies with NA or NM values do not appear. 7% INDUSTRY ANALYSIS The Oil, Gas & Consumable Fuels industry is cyclical in nature and is one of the most important globally because it touches so many others. It is broken down into its component parts by the nature of activity performed. Upstream activities are related to finding and producing commodities; midstream refers to the transportation of product from the wellhead to intermediate customers; and, downstream includes the refining, transformation and marketing of related products. Coal producers are integrated, much like the players in alternative fuels like uranium. Some of the largest players in the industry are the integrated oil & gas producers (aka Big Oil). Close to two-thirds of the world s energyneeds are satisfied by hydrocarbons (crude oil and natural gas). Althoughconservation, increased efficiency and substitutes are gaining in prominence,they are not likely to significantly reduce this dependence in the near future.crude oil prices have moderated at present due to lagging economies and newsupplies coming online. In 2004, West Texas Intermediate (WTI) crude oil brokeout of its historic trading range of $10 to $40 per barrel on a steady climb tomore than $145 per barrel in June 2008 before crashing to under $40 by the endof 2008. Since then the price of spot crude has climbed back near the $90 to$110 range before falling again. Natural gas prices, responding to excesssupply, have retreated to the $2 to $4 range per million BTU (British thermalunit). Coal prices are dependent on the energy content of the type of coalconsidered and its location, but it, too, has climbed significantly over thepast few years. Following nearly 20 years of underinvestment,the supply of crude oil is now keeping pace with slackening demand. Longer term demandshould grow at about 1.8% per year, meaning it is expected to grow more than40% over the next 20 years. Natural gas demand is expected to rise over time,according to the American Petroleum Institute, as its cleaner-burningproperties increase in value for industry. Coal consumption is projected togrow at about 1.7% per year over the next 20 years, based on US EnergyInformation Administration forecasts. Analysis of companies in this industry beginsby forming a view of the global economy and geopolitics, which is combined witha supply and demand analysis that leads to commodity price forecasts. At theindividual firm level, how efficiently a company operates goes a long way indetermining its profitability. Supply management is an important factor, too,as high commodity prices are affected by how much supply the industry as awhole produces. Geographic positioning can also be important, as regionaleconomic cycles may not synch up well with each other. The so-called supermajor integrated oilcompanies include Exxon Mobil (XOM), Plc (), Chevron (CVX), Total SA(TOT), and ConocoPhillips (COP). Some of the other major Exploration &Production firms include Anadarko Petroleum (APC), DevonEnergy (DVN) and Apache (APA). On the Refining & Marketing level, majorplayers include Valero Energy (VLO), Sunoco (SUN), and Tesoro (TSO). The majoruranium producer is Cameco (CCJ). PEER GROUP: Oil, Gas & Consumable Fuels Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 39.31 123,937 33.60 223,399.00 3,859.00 STO STATOIL ASA 19.95 65,948 NM 56,557.00-775.00 PBR PETROLEO BRASILEIRO SA- PETR 9.65 61,819 26.81 86,663.00 2,350.00 PBR.A PETROLEO BRASILEIRO SA- PETR 9.25 61,819 25.69 86,663.00 2,350.00 SU SUNCOR ENERGY INC 34.31 56,778 15.81 30,891.00 3,607.00 OXY OCCIDENTAL PETROLEUM CORP 69.41 53,116 97.76 11,804.00 542.00 XOM EXXON MOBIL CORP 82.55 349,773 26.89 222,508.00 13,010.00 RDS.A ROYAL DUTCH SHELL PLC 63.29 265,274 24.44 284,524.00 10,711.00 RDS.B ROYAL DUTCH SHELL PLC 64.86 265,274 25.04 284,524.00 10,711.00 CVX CHEVRON CORP 119.63 227,222 34.88 121,423.00 6,499.00 TOT TOTAL SA 55.74 140,818 17.53 144,524.00 8,158.00 The peer group comparison is based on Major Integrated Oil & Gas companies of comparable size. PAGE 2
COMPANY DESCRIPTION p.l.c. operates as an integrated oil and gas company worldwide. It operates through three segments: Upstream, Downstream, and Rosneft. The Upstream segment engages in the oil and natural gas exploration, field development, and production; midstream transportation, storage, and processing; and marketing and trading of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGLs). It also owns and manages crude oil and natural gas pipelines; processing facilities and export terminals; and LNG processing facilities and transportation, as well as engages in NGLs processing business. The Downstream segment refines, manufactures, markets, transports, supplies, and trades in crude oil, petroleum, and petrochemical products and related services to wholesale and retail customers. It offers gasoline, diesel, and aviation fuel; lubricants, and related products and services to the automotive, industrial, marine, and energy markets under the Castrol,, and Aral brands; and petrochemical products, such as purified terephthalic acid, paraxylene, acetic acid, olefins and derivatives, and specialty petrochemical products. The Rosneft segment engages in the exploration and production of hydrocarbons, as well as jet fuel, bunkering, bitumen, and lubricants activities. This segment also owns and operates 13 refineries in Russia; and approximately 2,950 retail service stations in Russia and internationally. The company also produces bioethanol and biobutanol; exports power generated from sugar cane waste to the local grid; transports hydrocarbon products through time-chartered and spot-chartered vessels; and holds interests in 14 onshore wind farms with a generation capacity of 1,452 megawatts. p.l.c. was founded in 1889 and is headquartered in London, the United Kingdom. 1 St James's Square London SW1Y4PD GBR Phone: 44 20 7496 400 Fax: 44 20 7496 463 http://www.bp.com Employees: 75000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 3.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 60% of the companies we cover. Efficiency 2.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 30% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 2.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 40% of the companies we analyze. Income 5.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 90% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.53 Q4 FY17 1.77 E 2017(E) 2.43 E 2018(E) INCOME STATEMENT Net Sales ($mil) 60,018.00 47,047.00 EBITDA ($mil) 6,772.00 2,904.00 EBIT ($mil) 2,868.00-592.00 Net Income ($mil) 1,769.00 1,620.00 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has increased when compared to the same period a year ago. Sales and net income have grown, and although the growth in revenues has outpaced the average competitor within the industry, the net income growth has not. has liquidity. Currently, the Quick Ratio is 0.82 which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. During the same period, stockholders' equity ("net worth") has increased by 7.81% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 25,864.00 25,566.00 Total Assets ($mil) 271,489.00 262,216.00 Total Debt ($mil) 65,784.00 58,997.00 Equity ($mil) 98,521.00 91,376.00 PROFITABILITY Gross Profit Margin 16.26% 13.61% EBITDA Margin 11.28% 6.17% Operating Margin 4.78% -1.26% Sales Turnover 0.82 0.69 Return on Assets 1.42% -1.40% Return on Equity 3.91% -4.03% DEBT Current Ratio 1.21 1.25 Debt/Capital 0.40 0.39 Interest Expense 389.00 310.00 Interest Coverage 7.37-1.91 SHARE DATA Shares outstanding (mil) 3,300 3,152 Div / share 0.60 0.60 EPS 0.53 0.51 Book value / share 29.86 28.99 Institutional Own % NA NA Avg Daily Volume 4,680,325 4,453,662 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for was recently upgraded from Hold to Buy on 11/9/2017. As of 12/7/2017, the stock was trading at a price of which is 5.4% below its 52-week high of $41.55 and 18.8% above its 52-week low of $33.10. 2 Year Chart HOLD: $31.26 2016 BUY: $36.15 BUY: $40.72 HOLD: $34.94 $45 $40 $35 $30 MOST RECENT RATINGS CHANGES Date Price Action From To 11/9/17 $40.72 Upgrade Hold Buy 8/11/17 $34.94 Downgrade Buy Hold 5/31/17 $36.15 Upgrade Hold Buy 12/7/15 $31.26 No Change Hold Hold Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/7/2017) 45.41% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.81% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 23.78% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a significant discount compared to an average of 235.97 for the Oil, Gas & Consumable Fuels industry and a premium compared to the S&P 500 average of 25.35. For additional comparison, its price-to-book ratio of 1.32 indicates a significant discount versus the S&P 500 average of 3.22 and a significant discount versus the industry average of 4.85. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 33.60 Peers 235.97 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a significant discount to its peers. Price/Projected Earnings 16.21 Peers 34.94 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. is trading at a significant discount to its peers. Price/Book 1.32 Peers 4.85 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 0.58 Peers 2.08 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 8.50 Peers 9.67 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a discount to its peers. Price to Earnings/Growth 0.01 Peers 1.00 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 195.90 Peers 152.97 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 23.30 Peers 26.85 Lower. A sales growth rate that trails the industry implies that a company is losing market share. trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5