BP stock: How low can it go?

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- BP's stock price, which hit a new low, could continue falling over the next few weeks as uncertainty around future costs to the company grow, analysts said Friday.

The beleaguered oil giant's stock fell 6.1% to $26.96 a share Friday, piercing the $28.56 low set in the previous trading day. The stock is now down nearly 53% since April 20, when its Deepwater Horizon oil rig exploded in the Gulf of Mexico, killing 11 workers.

chart_ws_stock_bpplc.03.png

BP's stock held steady above $29 a share for a time -- propped up by the company's decision to suspend its dividend for the remainder of the year and the removal of CEO Tony Hayward from day-to-day leadership of the cleanup operations -- before falling late in the week amid a sell-off in the broader equity markets.

But some analysts say that an end to the downward spiral could be far from reach, as investors offload the stock on fears that cleanup, legal and regulatory costs could soar.

"BP's now in the crosshairs of every regulator and politician known to man," said Tom Orr, head of research for Weeden & Company. "The stock could go into the teens for all we know."

BP said that it has so far spent over $2 billion on cleanup. And last week, under pressure from the government, the company agreed to set aside $20 billion in an escrow account for spill-related costs, an amount that does not cover fees and penalties that could be imposed by the federal government.

Analysts say the sheer magnitude of the oil spill, seen as the worst environmental catastrophe in American history, and the impact on Gulf workers, will likely result in a costly legal overhang for years to come, making it difficult to value the stock today.

"The issue here is that it's a stock that has an unquantifiable liability. It's hard to forecast," said Jason Gammel, an analyst at MacQuarie Research.

Yet, that has not deterred some from touting it.

Some analysts have recently called the stock a 'buy,' despite recent downgrades by credit rating agencies, saying that its financial resources outweigh the potential cost of the oil spill.

"Although this spill is astronomical, we have to remember that big oil companies like BP could still make astronomical profits and it has a lot of attractive assets it can sell to make money," said Phil Flynn, senior market analyst at PFG Best. "I'm still confident that BP will avoid default."

Still, Flynn conceded that there is cause for investor confidence to erode, given the unknown potential for political backlash, and even hurricane forecasts, which could hamstring cleanup efforts.

Whether BP's stock continues to decline or rebounds hinges on the successful completion of the relief wells, says Pavel Molchanov, an analyst at Raymond James, a solution that BP estimates could take another three to four weeks. Until then, Molchanov says, there aren't a lot of reasons to buy the stock.

This could further punish the company's market capitalization, which has fallen to $85 billion, from more than $160 billion since the oil rig explosion in April, leaving BP quite vulnerable.

"BP's market cap is eroding and its ability to finance itself in the capital markets is impaired," said Orr. "It's anybody's guess what can happen, but the fear of the market is that the liability could be so enormous that BP may have to seek bankruptcy protection."  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,982.59 22.02 0.13%
Nasdaq 4,444.91 -4.65 -0.10%
S&P 500 1,978.91 0.57 0.03%
Treasuries 2.49 0.02 0.89%
Data as of 6:47am ET
Company Price Change % Change
Apple Inc 99.02 1.99 2.05%
Facebook Inc 74.92 -0.06 -0.08%
Bank of America Corp... 15.50 -0.09 -0.58%
Dollar Tree Inc 54.87 -0.08 -0.15%
Family Dollar Stores... 75.74 15.08 24.86%
Data as of Jul 28

Sections

Herbalife shares tumble after the maker of nutritional supplements reports earnings that fall short of analysts' estimates. More

New annual report from U.S. government shows the long-term prognosis for Medicare has improved thanks to slower health spending, while the outlook for Social Security remains unchanged. More

Online dating site OkCupid found its users were more likely to have conversations when it told them they were more compatible than in reality. More

Actor-founded This Bar Saves Lives had Hollywood connections, but learned Start-Up 101 the hard way. More

Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.