Valuation of Aker BP
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Abstract
This thesis aims to answer the research question “What is the fair share value of Aker BPASA as of 16th of March 2022.” As of 16th March 2022 Aker, BP traded for NOK 278 pershare at the Oslo Stock Exchange. The fair value was estimated by utilizing the valuationmethods documented by Aswath Damodaran, combined with analytical frameworks such as,PESTEL, Porter’s Five Forces and VRIO analysis.
The valuation of Aker BP begins with an in-depth strategic analysis of Aker BP’s micro andmacro environment. The results show that several risk aspects have the potential to limit longterm growth and value creation. Following the macro-environmental analysis, an in-depthanalysis of the current market for oil and gas was conducted. The findings are quite significantin favor of Aker BP and thus give a bullish outlook on future demand and price. Lastly, thestrategic analysis ends with a competitive analysis of Aker BP as well as an in-depth analysisof the resources and capabilities that are regarded as key drivers for the value creation at AkerBP. Our strategic analysis concludes that several factors make the oil and gas industry attractivefor the short to medium time for existing companies, and that the resources Aker BP possesseswill be vital for future growth.
Following on, as the next step in the valuation of Aker BP, we present a detailed analysis ofpast financial statements to forecast Aker BP`s future performance. The relevance of pastfinancial statements can be presumed as somewhat limited due to recent mergers andacquisitions. Nevertheless, an analysis based on the last five years was conducted. The futureperformance is estimated as a result of both the industry, company strategic analysis, andhistorical financial performances. The cost of equity and cost of debt is estimated to equal9,13% and 6,11% respectively for the duration of the fundamental valuation.
The fundamental market share value of Aker BP is estimated after subtracting net debt and isset to equal NOK 365 per share. The relative valuation based on comparable companiesprovided an estimated value per share of NOK 355. Lastly and sensitivity analysis wasconducted, and the findings show that the result is heavily sensitive to key performance itemssuch as production outlook and predicted oil and gas prices. The share price as of 16th of March2022 was NOK 278, thus based on the fundamental value estimate of NOK 366 and favorableshort to medium-term market outlook, a buy recommendation for Aker BP ASA is provided asthe conclusion of this thesis.