Analyst Note| Allen Good, CFA |
BP's first-quarter adjusted earnings exceeded market expectations at $6.2 billion compared with $2.6 billion a year ago largely on higher commodity prices. Adjusted earnings exclude post-tax charges of $24.4 billion related to the decision to exit the 19.75% holding in Rosneft. We previously incorporated this decision into our model and fair value estimate, assuming a value for BP’s Rosneft stake at $3.6 billion. If we mark it a zero, our fair value estimate falls by 3%, which we are likely to do with our next update given BP is assuming zero value. However, the ultimate realized value is likely to be greater, but unknown for some time. Regardless, BP looks undervalued currently. Our no moat rating is unchanged.