VARIOUS: BP stock prices plunge amid growing worries over its handling of the Gulf spill

Record ID: 721217

  • Title: VARIOUS: BP stock prices plunge amid growing worries over its handling of the Gulf spill
  • Date: 10th June 2010
  • Summary: NEW YORK CITY, NEW YORK, UNITED STATES (FILE) (REUTERS) VARIOUS OF BP PETROL STATION NEW YORK CITY, NEW YORK, UNITED STATES (JUNE 9, 2010) (REUTERS) (SOUNDBITE) (English) JOHN EADE, PRESIDENT OF ARGUS RESEARCH, SAYING: "We look at a lot of factors with BP and with historical valuations it's very low now. On a PE basis, on a price to sales basis, the dividend yield is near an all-time high. But none of those suggest that the stock is at a floor. There's just too much unknown with the company's ultimate liability here with the spill. So, it's down 50 percent on all the metrics, it looks like a value, but the risks are extraordinarily high at least until they've capped that well."
  • Embargoed: 25th June 2010 13:00
  • Keywords:
  • Topics: Disasters / Accidents / Natural catastrophes,Finance
  • Reuters ID: LVA8LI9FHYTDUGP1G71FLMJFV3GF
  • Story Text: BP shares trading on U.S. exchanges fell more than 15 percent to a 14-year low on Wednesday (June 9) on growing worries about the costs the oil company will incur after the Gulf of Mexico oil leak.
    Depositary shares closed at $29.20 (USD), down $5.46 on the New York Stock Exchange, the lowest closing level since August 14, 1996. The stock has lost more than half its value since the April 20 disaster.
    John Eade of Argus Research said he doesn't see a BP stock rebound in the immediate future.
    "There's just too much unknown with the company's ultimate liability here with the spill. So, it's down 50 percent on all the metrics, it looks like a value, but the risks are extraordinarily high at least until they've capped that well," said Eade.
    BP's 12-month forward price-to-earnings ratio has dropped to 5.45, making it the lowest of all of the oil majors, as the losses dropped its market capitalization to $91.4 billion.
    Shares gapped lower about 1:30 pm EDT (1730 GMT), after an article appeared on Fortune magazine's website quoting oil industry analyst Matthew Simmons, questioning the company's liability for the oil spill and its ability to survive the crisis.
    Eade says he thinks the oil giant will ultimately make it through this time of turmoil.
    "I don't think it would cease to exist. There are tens of billions of dollars worth of assets in BP that would be acquired by another company or re-branded in some way. So they're not going to completely shut down the company. If they did, the price of oil would be sky-rocketing higher because you take a major source of oil off the market.
    The company said on an analysts' conference call on Friday that it has "plenty" of cash to deal with the problem, and the Obama Administration has made similar comments as the company grapples with clean-up in the Gulf.
    Concerns that the company will have to suspend its dividend payment under pressure from U.S. politicians who say the money should go toward paying for legal claims and environmental damage in the Gulf have also contributed to the selling. In the past two days alone, seven analysts have cut their expectations on the likely payout.
    Other stocks also associated with the Gulf spill were hit hard. Transocean, which owns the sunken rig, lost $3.75 to $42.58, while Anadarko Petroleum lost 8 percent to $34.83 a share.
    "If Exxon Mobil knew how to cap this well, they'd send the boats and the technology over to do it. Same with Shell. Same with ConocoPhillips. This could happen again, right? Nobody has a solution for this. So, I think the risk profile of the industry has increased, not just because of the one spill, but because it could happen again. The entire industry has not been able to come together for a solution yet," said Eade.
    BP reported about $27 billion in cash flow from operations in 2009 and total liabilities amounted to about 56 percent of total assets on its balance sheet of about $235 billion.
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