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Where is the BP Plc shares headed? |
kumarcalcutta
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Joined: 01 Jun 2010
Posts: 1
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 Posted: Tue Jun 01, 2010 5:45 am Post subject: Where is the BP Plc shares headed? |
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BP Plc share price analysis
28th May, 2010.
BP Plc’s share plunged more than 23.5% on YTD basis. The news on BP and its uncontainable oil leak in the Gulf of Mexico is primary reason for this disastrous performance. When we compare its price performance with its competitors - Chevron Corp (CVX), Exxon Mobil Corp (XOM) and Royal Dutch Shell (RDS-B) - we find that BP has significantly underperformed its competitors’ performance.
Now, the following questions arise: -
a) What is the best estimate of the scale of BP’s potential liabilities?
b) How long it would take the stock to settle?
c) Is BP a takeover target for other major oil companies?
d) Finally, is it a right time to buy BP? |
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Where is the BP Plc shares headed? Replies |
nodoodahs
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Joined: 06 May 2005
Posts: 2408
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| Posted: Tue Jun 01, 2010 6:10 pm Post subject: Re: Where is the BP Plc shares headed? |
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| kumarcalcutta wrote: | ...
Now, the following questions arise: -
a) What is the best estimate of the scale of BP’s potential liabilities?
b) How long it would take the stock to settle?
c) Is BP a takeover target for other major oil companies?
d) Finally, is it a right time to buy BP? |
I don't think a) and c) are useful questions.
Now, b) and d) might be useful, depending on the holding period you're interested in and the style of trading you're doing.
For instance, hypothetically, if I had a strategic allocation to "basic materials" or "integrated oil & gas," then I might be intrigued by significantly overweighting BP in that allocation; maybe replacing some of an ETF or fund holding with shares of BP.
Also hypothetically, I could play the bounce from here with an accumulation range and a stop loss, or with options as a stock replacement strategy.
Again hypothetically, if I were interested in a longer-term value trade, then BP is looking pretty attractive relative to its peers, at least in SOME measures, like PE, Div Yld, PB. However, in terms of PEG ratio, it looks like XOM and CVX are still cheaper.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose. |
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rffrydr
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Joined: 30 Oct 2005
Posts: 16939
Location: Sunny California
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| Posted: Tue Jun 01, 2010 10:44 am Post subject: |
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"Underperform"....that's funny!
| Quote: | BP has now tried and failed five times to stop the Macondo well flowing. Last weekend’s top kill and junk shot
operations have ended in failure, despite initially looking quite positive. The next plan is to replace the damaged
riser pipeline, which in the event of failure could significantly increase the flow of oil to the surface. Given the fact
that the previous plans (which had higher chances of success) have failed, this new prospect does not give us any
real confidence that it will succeed.
BE
There has been much speculation regarding both Tony Hayward’s future at the company and the possibility of the
dividend being cut. In our view the situation is beyond both of these points and the key question is now “can BP
survive?”
BE
BP has spent c.$1bn to date and the future costs will be significant. Adding in the inevitable litigation costs, this will
have a major financial impact on the company which realistically cannot be quantified in the short term. However,
what worries us the most is the emotive language coming from the Obama administration and the reputational
damage done so far. It is difficult to see how the company can recover and it remains unclear what punitive
measures will be put in place in terms of its operations in the Gulf of Mexico.
BE
In the worst case scenario, BP’s efforts look fruitless and the two relief wells which should kill the well looks like the
only realistic option. However, these wells will not be completed until August which will prolong the situation and the
environmental impact beyond what the Obama administration will deem acceptable.
BE
We are very negative on the prospects for BP and this situation has a real possibility of breaking the company.
Given the collapse in the share price and the potential for it to fall further we expect that it could become a takeover
target – particularly if its operating position in the US becomes untenable.
We therefore change our recommendation to Sell (from Buy) and remove our target price. |
--Arthbutnot
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Today is the Tomorrow you worried about Yesterday! |
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