Sunday 6 June 2010

BP Update: Time to buy yet?

Tony Hayward announced this morning on the UK Andrew Marr TV show that the new cap put in place by the company is bringing up 10,00 of barrels of oil per day. This is most likely the majority of the oil and BP are working to optimize the rest over the next few days.

This is the first piece of good news for BP for weeks. Although the terrible catastrophe that was unleashed will remain as an environmental challenge for years to come.

Also there are now some good contrarian indicators coming into place. The US President has been talking about taking every penny from BP and stopping dividends. The UK bank analysts have been talking up the prospect of a take-over. When things get this bad you are normally at the nadir of a crisis.

Earlier in the week I said I would buy BP at under £4.00, but with this news and the price at £4.33 now may be a good chance to pile in. I don't doubt the dividend is going to get cut for political purposes if nothing else. just like Tony Hayward will get sacked.

This will mean the long-term share price of BP is not going to recover towards £6.00, however, at £5.00 with an 8-10% dividend that will be a pretty good investment.

6 comments:

Richard Elliot said...

Oh, how I wish I had some liquid funds at the moment....

Andrew B said...

the old adage 'buy on the rumor and sell on the fact' seems to fit here

Good unconfirmed news now giving short term bounce.

it will take a few days to confirm the percentage collected (anything less than 110% will be seen as a failure) and then when BP start quantifying the lawsuits and the costs of building up the new sandbanks etc, at which point we all go how much?

In a couple of years time when business is back to normal and the lawyers have pared the bills back things will properly recover.

Budgie said...

Our colonial cousins are a litigious lot, and some of them seem to hate the Brits, so I think BP are in for it.

Timbo614 said...

well, they are up against the market this morning, and the market id going to be awful...

Savonarola said...

BP remain vulnerable to the punitive damages which will follow Obama's threats and cheerleading of the "Get BP campaign". Years of litigation and 10.000 inflated claims by all and sundry will sap BP's cash and management. Too many unknowns.

James Higham said...

Just don't put too much on it.