Merrill Lynch added BHPB could be reporting substantially higher reserves as soon as the third quarter of this financial year, which has led Merrill Lynch to believe that the market was undervaluing BHPB by up to 30 per cent.

Merrill Lynch said in its report on BHPB that instead of the 1409 million barrels of oil equivalent (oil, gas and condensate) booked proven reserves, its adjusted figure was 2003 mmboe.

According to the Merrill Lynch report, by using the Australian standard of proven and probable reserves BHPBP had reserves of 2711 mmboe, which meant its petroleum division was valued at $US11.6 billion. This is in contrast to the consensus view among brokers' that put it in the vicinity of $US8.5 billion to $US9 billion.

On the basis of its revised view of the global petroleum business, Merrill increased its assessment of the value of BHPB shares as a whole by 44 cents a share to $10.95.

Currently, BHPB shares are trading at $10.50, up 2c on yesterday's trading.