Analysis: BP back in favor despite spill legacy, Russia doubts

Sun Jan 26, 2014 3:54pm EST
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By Andrew Callus

LONDON (Reuters) - If you had spent 10 pounds on BP shares on April 19, 2010, you would have just nine pounds now, including dividends. A poor investment, however you cut it, but also a remarkable recovery.

A day later an explosion at the Deepwater Horizon oil rig in the Gulf of Mexico would deal the United States its worst offshore oil spill, and BP would face the wrath of President Barack Obama himself for the death and destruction it caused.

Over the next two months, BP shares lost nearly two thirds of their value as the scale of the disaster threatened to sink the company.

Now some investors are sensing a better future than they had dared to hope.

The shares are flirting with post-spill highs, and are the second-best performer in the industry's top five behind Exxon Mobil since the start of the fourth quarter.

This may have something to do with the misfortunes of its peer group - a profit warning at Shell, cost overruns at Chevron, and worries about cashflow and production at Exxon - not to mention a price-enhancing share buyback program put in place last year, but it is still quite a turnaround in sentiment from 2010.

Then, the price of credit default swaps on BP bonds showed that even its solvency was in question, and Shell thought it might have to mount a rescue bid.

"It wasn't so much that we wanted to buy, more we thought the British government might ask us to step in," recalled Peter Voser, Shell's chief executive at the time, in a discussion with Reuters last year.   Continued...

BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk/Files