Reality Check

Reality Check

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July 12, 2010

Can BP Maintain Its Momentum?

By Robert Hashemian, Vice President of Web Development


Monday morning and BP is up for another day, nearly 6% surpassing $36. the stock is up by 20% since last week and with its recent attempts at containing the leak being generally reported as successful, the company appears to be on the path to recovery.
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This is a drastic turn-around for a company that up until a few weeks ago was deemed as good as insolvent. So should we run out and buy a bundle of BP shares? Hardly a wise move.
 
The current upbeat sentiments for BP are just as hyped as the predictions of its impending demise. All that has happened so far is that people have become bored with the images of the oil cloud gushing under the Gulf and the hard times faced by countless people who depend on the area for their living. The oil is still leaking, people are still dealing with the fallout, and the pollution continues to spread ever wider.
 
The market already knew that the containment will arrive by August via the relief wells. We're only a couple of weeks away from August anyways. The drumbeat of positive news from BP are only there to deflect attention from the bad news and give the oil company a bit of positive spin.
 
Bankruptcy was hardly in the cards, but BP still faces a mountain of lawsuits and cleanup costs. Maybe the executives are trying to squeeze a bit of money out of their shares or maybe the company is grooming itself to be taken over. Whatever the case, BP's troubles are far from over and for now the only prudent investment in BP is time to see if it can finally shut off the leak for good and if it can navigate its legal challenges successfully.

Robert Hashemian is VP of Web Development for TMCnet.com with a keen interest in financial markets. To read more of Robert’s articles, please visit his columnist page. He also maintains his personal Web site at www.hashemian.com.
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