B P Global Energy (NYSE: BP) Down But Not Out

By Andrew Montero

Shares of the former British Petroleum, now known only by its initials (NYSE: BP) continued to struggle this week as the U.S. government further enflamed an already tense situation.  Certainly the continuing flow of oil in the Gulf is a major problem.  The death of many forms of marine life and plant life due to poisoning and suffocation from the oil is a horrible situation as well.  Everyone already knows the tragic situation unfolding in the Gulf of Mexico, not to mention the loss of 11 workers who died trying to make a better life for themselves and their families. The government, however, has gone out of its way to throw gas on a already burning hot fire.  Among the culprits, one Ken Salazar, who audaciously made the assertion that BP should have to pay for all oil workers jobs in the Gulf that are lost due to the disaster and the coming moronic halt of drilling in the Gulf by the U.S. government, which can only be described as the ultimate in micro-mismanagement and nearsightedness.  This is a typical government responses, a knee jerk reaction to a serious problem, but one that makes little sense once you look at the situation.

Obviously BP needs to not only stop the oil from spilling into the Gulf, but they also need to compensate people whose incomes have been affected or destroyed by the situation and show some remorse, not make commercials to try and sway opinion.   The PR firm hired by BP has only caused further harm to their reputation.  Will companies never learn.  You can’t appear like you are trying to be concerned, you simply just really have to be concerned, and your actions speak for themselves in these situations.  Of course, our own US government and the President himself have been just as out of touch with reality on the ground in Louisiana.  Micro-management does not, has not, and will not work.

Why has the President not met with BP CEO Tony Heyward, nor spoken to him?  Why is Halliburton, which performed the cementing work on the well hours before the explosion, and other companies involved with the situation being avoided in discussions regarding compensation to fishermen and repair of the damage to the environment?  Why is the US government attempting to decide whether a non U.S. company pays its shareholders a dividend? These are just a few of the questions that need to be answered.  The daily onslaught of negative news regarding BP from the media and the government has been shameful at best and borderline criminal at worst.   BP has lost more than half of its value; over 100 billion dollars in market cap in less than two months due to this accident and the ensuing constant negative news highlighted by the minute.  This I cannot understand.  Did the government force the Banks and the financial markets to compensate all the folks who got screwed by the financial markets appetite and stupidity for unnecessary and irresponsible risk?  No they did not. Instead they handed them newly printed money and said….here you go……do over!  How can this same government and officials like Ken Salazar have the audacity to make the comments they are making now; even though these are certainly different circumstances.  Memo to Chuck Schumer: sit down and shut up!  BP makes almost three billion dollars a month from worldwide operations.  Certainly they should begin to repair the damage and their shattered image or what is left of it.  A nice start would be to set aside several billion dollars to fix the damage they and other companies have done to the wetlands off the coast of Louisiana.

Secondly, they need to hold daily press briefings and let folks know what they have done each day and what they intend to do tomorrow.  Thirdly, BP and the U.S. government need to get the brightest and best engineers together to create equipment and contingency plans which ensure this level of a disaster never happens again.  There also needs to be an investigation of the Mineral Management Services office and the corruption that has so obviously possibly taken place in that government entity.

The rampant speculation on damages by Attorneys, Congressmen, Senators and Green energy coalition members all mugging for the cameras and the American public has done nothing to help the situation stabilize, and in fact has stoked the flames to continuously assault the share price so far down. Unfortunately for them, solar power and wind power do nothing to help relieve the huge demand for gasoline and diesel to power everything from snow blowers, lawn mowers and combines to private vehicles, tractor trailers and freight trains.  The Obama administration is making things worse not better, when they say they will halt deep water drilling for a minimum of six months.  Let the record show that the people and the government of the gulf region, including Governor Bobby Jindal, who has shown tremendous leadership in this crisis; are pleading with the Obama administration to not halt the drilling or exploration.  To do so only adds to the tragedy of the situation. Whether or not we like the way BP has handled the situation, they have clearly said they will pay to clean up and restore as much as possible.  Officials like Attorney General Eric Holder do nothing positive making comments that the government will make sure BP is forced to pay for what they have done; we already know this to be true.  Harping on it once again only adds to the insanity of the situation. The fact of the matter is we need the energy resources in the gulf now more than ever, and stopping the industry at this point in time will not only hurt the economy and gas and oil prices but the entire gulf region as well, which relies heavily on the oil industry for jobs.

The core of the matter here is a tragedy has occurred.  We all want to wish it could be reversed.  Of course, the truth is it did happen, it’s a difficult situation and the fact that BP as one of the true cash cows in the financial markets has lost more than 50% of its value; over 100 billion of its market cap is nothing short of ridiculous.  Will they have to pay billions to fix the situation as much as possible? Yes they will.  BP’s, which basically prints money with oil over $70 a barrel, focus right now should be on stemming the leak, engineering deepwater drilling equipment, safety procedures and contingency plans to ensure this never happens again, along with a massive cleanup. BP stock is near 10 year lows right now, and has been trending back up a bit over the past few days.  Traders should probably stay away, shareholders should be adding as it continues at these lower levels if they are stuck anywhere above a 44 dollar cost basis in my opinion.  If you own below 44 dollars, and have a healthy risk appetite, you could stand to make a ton of money, provided you have a long term strategy and can just sit back and watch.  I expect the volatility to continue till at least the end of summer or the stemming of oil flow on a permanent basis.  BP has a global energy reach, and demand for crude will rise not fall, regardless of what the United States does with its green energy ambitions.  The idea that BP is going bankrupt at this point is nothing but a media creation and one must question who is spewing that lie and what their agenda might be.  For certain there is risk in owning BP stock or ADRs at this point, but it is a risk which will be rewarding for those with patience who can read between the lines.  The recent bounce back from below 30 dollars on the stock price is a telling sign.  As always, I suggest investors do their own due diligence with this equity. It is my opinion however that the reward of owning BP, specifically at these prices below 40, far outweigh the risk of bankruptcy.  Let’s say a prayer for the people of the gulf coast who have been impacted by this disaster, and hope to see the oil stop flowing freely soon from the former Deepwater Horizon Well.

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Disclosure:   Long BP