I’ve been pretty involved in researching Gulf of Mexico companies after BP blew their Macondo well in April. I’ve invested in and written about a few including ATPG, SGY, CIE, ESV, DO and I have to say so far so good. With the moratorium likely ending very soon things are looking good going forward as well.
One company that I did not invest in was BP. I felt that I had no way of knowing what the eventually liability for BP might be through civil, criminal and environmental penalties and lawsuits.
Yesterday BP had no problem issuing bonds at very low rates, and in fact the offering was quite oversubscribed
“Investors lined up Tuesday for BP PLC's first U.S. bond since the Deepwater Horizon oil rig exploded in April, and demand for the debt was so robust that the U.K. energy giant increased the size of its offering to $3.5 billion.
Portfolio managers and others placed $12 billion in orders for the five- and 10-year bonds from BP Capital Markets PLC, the funding arm of energy giant, according to people familiar with the deal. The sale was originally slated to be $2 billion to $3 billion in size, these people said.
BP sold $2 billion of the five-year 3.125% notes at a discount to yield 3.187%, and $1.5 billion of the 10-year 4.5% notes at a discount to yield 4.569%. In secondary markets, investors quickly bid up prices on both parts, driving down the yields, which move inversely to price, by 0.10 to 0.15 percentage point.”
Clearly there is no cash crunch coming for this company.
At $40 per share there is still considerable upside to the $60 it traded at pre-spill where I dare say it wasn’t overvalued by any means. I’m likely not going to buy at this point unless I get offered a better price. One investor who is invested in BP and still likes it is Whitney Tilson. He is going to look very good on this investment as he was out recommending it at the very darkest hours when the oil was gushing and the politicians were screaming.
Here is a video interview with Tilson’s partner Glenn Tongue discussing BP and other investments: http://video.yahoo.com/watch/8278147/22058713
