Sunday, 4 March 2012

Could BP be about to gush!

BP @ 496.50p, +.10p (+0.02%)

BP looks to have taken another positive step towards addressing the uncertainty around the shares, and the company's prospects, with a new $8bn (£5bn) settlement with more than 100,000 victims of the Gulf of Mexico oil disaster.
The out of court settlement had seemed to be a bit of an on - off affair with the postponement of the case's New Orleans Court Hearing, by Judge Carl Barbier, to give all parties the opportunity to build on progress that had been made.
However, this looked to have failed last week so it is a surprising development to read in this morning's Mail on Sunday that a settlement had been reached.
The agreement still requires approval by the New Orleans court but could enable BP to now focus on reaching an agreement with its partners, the US Government, and other states that suffered in the aftermath of the disaster.

But, as I began this post, it is still positive news for the company and will hopefully be seen as a progress whilst addressing some of the uncertainty about the company's prospects, particularly as this action, with some 100,000 claimants, was viewed as the most complicated and expected to run for 2 years or more.

If BP can close the PE rating gap with Royal Dutch Shell this would add 68p to the current price bringing it up to 564.50p but at this level the dividend yield would be just 3.54% compared to RDSB's 4.7%.
So I would expect RDSB to maintain some form of premium over BP on the basis of the better yield and better visibility of the company's earnings whilst BP continues to have legal and strategic uncertainty surrounding it.
The opportunity continues to be there for BP though, if it can resolve these concerns and ratchet up the dividend to previous levels.
But, lets see how markets judge the company's progress when they open again tomorrow.

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Previous Posts:
- BP ex. Dividend today.

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