British Petroleum (NYSE: BP) is a major integrated oil company with assets around the globe. The company faces two major problems that are punishing the stock price. The stock is trading at just 4.8 times trailing 12-month earnings, while peers Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM) trade at 7.1 and 9.4, respectively. So what are these problems bedeviling BP?

The first is the potential amount of the additional settlement for the Gulf oil spill, estimated to range between $17 billion and $21 billion. The second surrounds the TNK-BP joint venture in Russia. Because of disagreements between BP and the Russian oligarchs who run TNK, BP recently announced that it would exit the joint venture, which most recently accounted for about $3.7 billion in income for BP in 2011.

These are both significant problems, but investors shouldn’t view them in a vacuum. Let’s take a look at the bigger picture.

BP has more than enough cash on hand to settle the Gulf settlement. Moreover, BP should receive ample compensation for its share of the TNK deal, which amounts to about $35 billion at current valuations. BP is currently looking for a buyer for its interest and it won’t have trouble finding one. Once these two issues are inevitably resolved, BP won’t have any other major problems hanging over its head.

To be sure, the loss of the TNK partnership will result in $3.7 billion less income. However, the company had earnings per share (EPS) of about $8.06 in 2011; I estimate that losing TNK would lower EPS by only about $1 in 2012. BP would still have enough cash flow to cover dividends and capital expenditures in 2012 and beyond, even without its TNK-BP earnings. 

BP had $18 billion in cash at the end of 2011. The company’s management will put new capital to work, to offset the loss of TNK-BP income. The company has acquired assets, discovered new reserves and developed its existing assets successfully and profitably in the past. This practice won’t change.

The stock has more problems baked into its price than actually exist. With its major problems behind it, I estimate the stock’s price should rise to about $48.

Demand for oil and associated prices may be falling right now. However, according to the US Energy Information Agency, by 2016 (just four years from now) global demand for oil is expected to reach 95 million barrels (BBL) of oil per day, up from the current 2012 demand figure of 90 million BBL/day.

World supplies are tighter than in the past and the increased demand will continue to keep upward pressure on oil prices. Major oil companies will see earnings increase as the world economy eventually grows again in earnest. BP won’t get left out; the company just needs to put these ephemeral issues behind it, for the stock price to soar. And we get to collect a 5.3 percent dividend yield while we wait.

Mark Bern’s experience includes over 20 years within the federal government in various positions in accounting, financial management and strategic alliance management. He writes extensively on investments.