There is something to love and hate in almost every stock. But today, I’m in a fratchy mood, so here are five things I hate about BP (LSE: BP) (NYSE: BP.US).
I called this one wrong
Buy on bad news, they say, and that’s exactly what I did after BP’s thoroughly disastrous Gulf of Mexico oil spill in 2010. But there was plenty more bad news to come, and I’m still 20% underwater on that trade. I subsequently took a few nibbles of BP at much lower prices, but it remains a red blot on my portfolio, a constant reminder that sometimes you can be too clever. It has also been a lousy five-year hold, down 13% in that time.
The bad news keeps coming
BT’s recent Q2 results disappointed, as it suffered a string of hits, including lower oil prices, an unusually high underlying effective tax rate of 45% due to the dollar’s rise against a basket of currencies, and falling income from Russia, with rouble depreciation and oil export duty to blame. Outside Russia, reported production fell 1.5% over the year to 2.24 million barrels of oil equivalent a day, largely due to business divestments. Q3 upstream production is heading for a seasonal dip.
Plus there’s that court case
We all knew the Deepwater court action would keep US lawyers happy for years but it certainly isn’t good clean fun. By playing it too soft at the start, BP opened the floodgates to a bottomless pit of artificial claims and dodgy lawyer behaviour. It has finally struck back with a series of appeals claiming lawyer misconduct, but has failed to block compensation scheme payments. It has shelled out $42.4 billion so far, and the second phase of the trial is only just beginning. The whole thing is out of BP’s control, and I hate that.
The Yanks aren’t the only ones who see BP as a cash cow
Cash-strapped governments around the world are keen to increase their tax take from whatever source they can, and an unloved global oil monolith like BP looks a tempting target. Simple as that.
It’s a global giant with problems to match
I’m still holding BP, because I believe that in the long run the love will outweigh the hate. But I expect it to continue testing my patience, as it battles against European Commission allegations of price rigging, US Federal Energy Regulatory Commission claims of irregular gas trades, and all the conflicts that come with doing business in Russia. It’s a global giant, yes, but with giant global problems.