After a long downward spiral, BP (NYSE:BP) rebounded a little bit on Wednesday, finishing at $35.25, a gain of $0.33, or 0.95 percent. For some that may look like a possible signal to load up on the stock again, but until a lot more clarity comes concerning the costs associated with the oil spill, BP will remain a crap shoot; for long-term and short-term traders.
The problem is, every time some new clarity comes, several more uncertain elements come to the forefront the dash the positive.
For example, the condition and cause of the blowout preventer and why it didn't perform as it should have. That leaves the possibility of some companies like Cameron International (NYSE:CAM), which built the preventer, open to some liability, but also possibly not.
Now there's the continuing salvage operation which must be performed in a manner which will result in the blowout preventer being in the condition it was when it sunk with the oil rig: Deepwater Horizon.
If something happens when retrieving it, the consequences could change the dynamics of liability going forward.
This type of uncertainty, which will dramatically affect the performance of BP in the years ahead, weigh on everyone, and until they're resolved, it's simply guesswork as to how much BP will end up paying and for how long.
Another factor is whether or not BP will be designated as "grossly negligent" by investigators, which could make a difference in fines of $4.9 billion, at the bottom, to as high as $17.6 billion in the worst case scenario.
One other aspect of that would be the release of their partners in the well, Anadarko Petroleum Corp. (NYSE:APC) and Mitsui (Nasdaq:MITSY) (via majority-owned MOEX Offshore), from liability, which would put billions more on BP to pay out, or save them money if they aren't designated as such.
This is why temporary successes don't do much to move the stock, as uncertainty always creates paralysis or a negative reaction to circumstances, and BP is far from having that settled for some time.
12 comments:
Rubbish
Absolute Rubbish
Pure refined Rubbish!
Who writes this stuff?
Al Gore
Complete Garbage!
"For example, the condition and cause of the blowout preventer and why it didn't perform as it should have."
What does that mean?
Weak indeed
it was useful information. If you can do better, why didn't publish your self?
one of the worst handled disasters... so much unknowns so much uncertainity.. BP = shame... should be made to go bankrupt and acquired!
"one of the worst handled disasters... so much unknowns so much uncertainity.. BP = shame... should be made to go bankrupt and acquired!"
What a load of nonsense - BP could have sat behind their limited liability US subsidiary and bankrupted that instead. Would have ended their US operations but that's not so far from where they are already.
BP still own the rights to profitable oil fields - a commodity which is running out and isn't going to be replaced to any meaningful extent any time soon. It's long term prognosis is good - if you're after a quick buck this is a risky buy. If you're buying it for the discounted cash flows of dividends this is a good buy.
This isnt about right or wrong but pure trading. Leave the sentimental tree-hugging nonsense out. Short term profits and losses can be made with this stock, but it is pure gambling. If we look at the long term,this still is Brit Petroleoum, and the value is still there, underground. Buy now, and make money when all this is forgotten a year or two down the road.
Absolute Garbage!
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