What Does 2011 Hold For BP?

Todd Shriber
Printer Friendly Version

Knocking on the dawn of a new year, the time seems right to look forward while also taking a look back and when it comes to oil companies, what better candidate to do that with than BP? To say 2010 has been an eventful year for Europe's second-largest oil company would be a gross understatement. In fact, this was the year that BP was forced to claim the title of Europe's second-largest oil company by market value, but there was so much more.

There is/was the matter of the Gulf of Mexico oil spill, the ensuing carnage on BP (BP) shareholders, the suspended dividend and a change of CEO, just to name a few issues. Love or hate BP, the company deserves this much credit: After trading for around $27 in late June, the stock has recouped a fair chunk of its post-spill losses and is now flirting with $45 after being locked in the $40-$44 range since October.

That is a pretty solid performance in about seven months time, but it still does not have BP all the way back to the $60 area where it traded before the spill. Is that what BP has in store for investors in 2011, a return to $60 or beyond? Well, maybe. Assuming oil prices do reach $100, that should be good for a couple of bucks (at least) on the stock and if the dividend is restored in some meaningful way, then institutions that have scorned the stock after the suspended payout could get back in the game and drive the price a tad higher.

Those are potential positive catalysts for the stock in 2011, but as TheStreet.com correctly points, for basically every positive catalyst that exists for BP, there is a negative counterpart. Issues such as the company not knowing exactly what its financial liability for the Gulf will be anytime soon, a potential pollution bill that could be as high as $4,300 per barrel spilled and possible criminal charges from the Justice Department cast a pall over ebullient feelings about BP in the new year. And do not forget that the government could still revoke BP's ability to operate in the Gulf.

Yet even with all those issues, a survey by TheStreet.com turns up some interesting factoids. First, 52% of those polled think BP shares trade between $50 and $60 next year. Split the difference and say BP finishes 2011 at $55 and buyers here still notch a return of 25%. Not bad. Beyond that, 23% of those polled think BP actually tops $60 next year while just 3% think the stock slides back below $40.

That is borderline irrational exuberance for a company dealing with the issues BP has to address, but it is hard to get around the fact that 2011 will be an interesting and pivotal year for the company.