Home > Uncategorized > BP Oil Spill Day 63

BP Oil Spill Day 63

Everyone including myself is concerned about this oil spill.  How much oil is leaking into the ocean?  When is it going to stop?  What wild life/plant life has been affected?  This is a huge man made disaster.  It hasn’t gotten any better since the explosion on the rig on April 20th.  With that much oil coming out, I would have thought the well would be empty by now but it just goes to show that oil companies like BP know where the oil is.  

Investors want to know whether it’s a good time to buy BP.  This is a difficult answer with so many unknowns such as how much is BP liable for?  how much is it going to cost to clean up?  When is this well ever going to be capped?  I am not willing to invest in BP yet especially after they have cancelled the dividends for the rest of 2010.  It is also very volatile, yo-yoing between about $29 and $32. 

Here is what the analysts have been saying since the beginning:

Upgrades/Downgrades

Date Brokerage Firm Action From To Old New
21-Jun-10 Oppenheimer Reiterated   Outperform $55 $45
17-Jun-10 Barclays Capital Downgraded Equal Weight Underweight  N/A  N/A
27-May-10 Oppenheimer Upgraded Perform Outperform  N/A $55
26-May-10 Howard Weil Reiterated   Market Outperform $70 $60
03-May-10 Argus Downgraded Buy Hold  N/A  N/A
26-Apr-10 The Benchmark Company Downgraded Buy Hold  N/A

I particularly like Oppenheimer for giving their opinion twice since the spill started.

It is absolutely obvious that BP’s target price should be lower than whatever it was before because no analyst could have expected a disaster of this magnitude, and the cost to fix this both in the short term and the long term is tremendous.  Cutting the dividend alone should result in a proportional target price reduction.  I believe a lot of investors especially long term ones have lost a significant amount of money because of this kind of coverage that is not updated according to the most recent events.  Investors need to do as much research as possible and make their own decisions because they cannot count on timely updates from analysts.

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