Exxon BP? Chevron BP? Not so fast

chart_ws_stock_bpplc.top(2).pngBP's stock is still well below where it was before the Deepwater Horizon rig explosion, but it has surged in recent weeks. Takeover chatter is one reason. By Paul R. La Monica, editor at large


NEW YORK (CNNMoney.com) -- You know it's a trader's market when one of the hottest stocks belongs to possibly the most hated company on the planet. Yup, BP continues to rally sharply from a 14-year low set last month.

With the U.S.-listed shares of the London-based oil giant popping 8% in Monday afternoon trading to nearly $37 a share, BP (BP) is now up more than 37% from its nadir. It is trading at its highest level since June 8.

paul_lamonica_morning_buzz2.jpg

It seems that investors are excited about the fact that BP is set to install a new cap on the leaking Deepwater Horizon well. That is raising optimism that the spill may soon be contained at long last.

But there's also chatter about BP possibly selling assets to raise cash. According to several reports, BP may be talking to Apache (APA, Fortune 500) about a sale of a stake in oil fields in Prudhoe Bay, Alaska. That could raise $10 billion.

Selling assets would make sense. But there's also a report in the Sunday Times of London suggesting that Exxon Mobil (XOM, Fortune 500) and another large U.S. oil firm, potentially Chevron (CVX, Fortune 500), may be looking to prepare a hostile bid for BP.

As I wrote in Friday's column about BP, the speculation of a takeover is not new. An analyst for J.P. Morgan theorized earlier this month that Exxon or Royal Dutch Shell (RDSA) might feel compelled to bid for BP sometime next year. But the analyst freely admitted this was an "M&A fantasy."

But it's dangerous for investors to be buying into the notion that BP may now be takeover chum.

It's amazing that just a few weeks ago, the bet on Wall Street was that the company was heading for bankruptcy. Now the rumor du jour is that other big oil companies are lining up like gentlemen callers in a Tennessee Williams play? Please. Much like Laura Wingfield in "The Glass Menagerie," BP will not be an easy sell.

First, BP, despite its huge market plunge, still is worth more than $100 billion. Presumably, BP's board and shareholders would want a big premium in order to accept a takeover bid. So BP would cost more than a pretty penny.

But beyond the issue of price, there's this more pressing question: Why would any company want to inherit the massive legal headache associated with all the claims tied to the Gulf of Mexico spill?

Sure, Exxon Mobil may be best equipped to deal with BP given that it was able to move on from the Valdez disaster in 1989 and is now the most valuable company in the U.S.

But are BP's assets really worth the hassle?

"It's very debatable that any company would be comfortable wading into this legal nightmare -- which would last many years. The biggest problem is getting your hands around the liabilities," said Pavel Molchanov, an analyst for Raymond James In Houston.

Even if a company was willing to look past the ocean of claims, there's the public relations issue.

Doug Ober, CEO of Petroleum & Resources Corporation (PEO), a closed-end fund based in Baltimore that invests in energy stocks, said that the speculation -- he said he's even heard some traders mention ConocoPhillips (COP, Fortune 500) as a possible buyer -- really makes no sense whatsoever. His fund does not own shares of BP.

"The likelihood of BP getting taken over is next to nil. Why would a U.S. company want to buy BP given the black eye that it has?" he said.

Plus, one would have to imagine that any takeover of BP would lead to a long, protracted antitrust review that could take months, if not years. And Molchanov said that process would likely need to take place by regulators on both sides of the Atlantic.

With all that in mind, Molchanov said he's not recommending BP to investors. He said other oil companies, such as Chevron and Hess (HES, Fortune 500), are trading at cheaper valuations. And there are still too many uncertainties surrounding BP.

That seems right. The only thing that appears certain is that an outright takeover of BP is incredibly unlikely.

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, La Monica does not own positions in any individual stocks.  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
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.17%4.24%
15 yr fixed3.26%3.30%
5/1 ARM3.33%3.42%
30 yr refi4.16%4.22%
15 yr refi3.25%3.29%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,121.25 -51.43 -0.30%
Nasdaq 4,529.12 1.43 0.03%
S&P 500 1,990.23 -4.06 -0.20%
Treasuries 2.55 -0.01 -0.58%
Data as of 12:41pm ET
Company Price Change % Change
Yahoo! Inc 38.88 0.23 0.60%
Bank of America Corp... 17.20 0.16 0.97%
Apple Inc 102.47 1.41 1.39%
Facebook Inc 77.81 1.01 1.32%
Oracle Corp 39.06 -0.52 -1.30%
Data as of 12:26pm ET

Sections

General Electric is the worst performer in the Dow this year. An analyst thinks the company needs to take a page from the AT&T playbook and split into several smaller companies. More

There's plenty of data out there, but keep an eye on housing, manufacturing and people's spending. More

Put on these wearable gadgets, and you'll have superhuman strength, sight, hearing and health. 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.