I don't know what to make of this stock... This oil spill even with liability just isn't going to bankrupt the company IMHO. Yet it keeps going down. I see the 7% yield and think this is a huge buying opportunity to nab a nice large integrated oil with a huge divy. a 30%+ drop seems wholly unwarranted. Please help me see how right/wrong I am?!?
Exxon Valdez... delayed payout, broken promises, no real penalty (some yes), 20 years of legal wrangling etc... WILL NOT BE TOLERATED IN THIS CASE. It's simply a different generation, and people are waking up to fool me once issues. Big oil is already on the chopping block even when everything is done right, clearly it was not, and recovery was far too slow. Years of bad publicity follow, along with Exxon comparisons, the oil lawyers won't be able to stand against the liberal jurists ready to cut their throats. The uncertainty of the economy, deflation, jobs, mixed with an oil spill disaster... the drop is certainly warranted.
i think you are right. the problem is that the bad headlines may continue for months effectively granting your investment to lose value. personally i bought a bit by selling otm puts (which are already itm ) and will continue the same on the way down. i can't see that 10B liability cap can be invoked retroactively (and enforced at the court). it pretty much depends on BP themselves how they want to settle the mess without damaging their reputation even more. Even if they decide for some large number (B$US) it will erase say 1 year of profit - so what. gl
My personal opinion is that BP won't stop getting hammered until the spill has been stopped and some type of reasonable estimate as to the liability has been determined. Right now there is too much uncertainty surrounding the cost of this disaster. Not only the direct cost to BP of attempting to stop the spill and cleanup the mess, but of future liability due to environmental damage etc. Couple this with the reputational damage and loss of goodwill and you have a recipe for more declines. You mention the dividend. While juicy, depending on the ultimate cost of this mess, there is a very real possibility of a dividend cut in the future. If not for cash flow reasons, then possibly as a way to say "See public, we are so committed to cleaning up this mess and so environmentally responsible that we've cut our dividend out of the goodness of our hearts to pay for the damage." It's tempting to pick the bottom in this stock but personally I am waiting for the leak to be stopped and to see some stability in price.
also, the weak euro and strong dollar make this a questionable play right now- I wouldn't be surprised if BP was even lower in 2 weeks.
my view on BP has changed after some additional review of available info. i still think the enviro impact is overstated, but with the current gov and elections coming up i think BP will become a bama punching bag. some are even talking criminal charges. it seems a prob with the bop might have been known and work went on with out checking it. look for the 60min interview with one of the platform tech guys. for a trade i am looking at long jan 2011 puts.
BP is toast....this is going to end up being one of if not the worst environmental disasters ever done by human beings. http://www.huffingtonpost.com/2010/05/20/bp-smoking-gun-oil-giant_n_583590.html
what if down the line court penalized BP big time. stock crashes and that will be great buying opportunity waiting for 38 range to dip in