BP WATCH: BP's US Shares Edge Up Despite Moody's Downgrade

18th Jun 2010 18:36

By Donna Kardos Yesalavich Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--BP PLC's (BP) shares rose in the U.S. Friday despite another hit to its credit rating, as investors saw the actions of the past week as removing some uncertainty and perhaps marking a bottom for the stock. BP's American depositary shares were up 0.3% at $31.81 in recent trading. Meanwhile, the cost to insure its debt fell slightly from Thursday. Option activity in BP was quieter Friday than in recent days, with the volume in bearish and bullish positions nearly even. With Friday marking the expiration of June options, much of the trading likely reflects investors "rolling" their previously held positions into July contracts. Moody's Investors Service on Friday cut its credit rating on BP by three notches to A2 from Aa2. The rise in the shares came as investors looked back on a week that may have marked a turning point for BP. The company took steps to work with the Obama administration and increased its rate of capture at the site of the oil spill after earlier in the week agreeing to cut its dividend and set aside $20 billion for a claims-paying fund. On Thursday, BP Chief Executive Tony Hayward received a daylong grilling from lawmakers at a congressional hearing. With all of that behind the company, investors are hopeful that most of the fearful sellers are already out of the stock and that it may even have bottomed or at least be near a bottom. BP's U.S. shares are now down 47% from April 20, the day the Deepwater Horizon rig exploded. The stock's lowest point since then came last week on June 9 when it reached an intraday low of $29. While BP is down nearly 6% for this week, it is up 10% from that June 9 low, and investors are hoping the gains from there will continue. Investors were encouraged Friday by a report that responders at the site of the oil spill captured some 25,000 barrels of oil on Thursday. The increased rate of capture--about 10,000 barrels of oil more than the typical figure for last week--puts BP on track to meet its plan to catch 53,000 barrels of oil by the end of the month. In addition, BP's standby loan has now risen to $7 billion as more banks join the group of lenders supporting the company against possible claims related to the oil spill in the Gulf of Mexico, a person familiar with the situation said Friday. However, the stock did slip 0.6% in London, as Friday was the first time U.K. investors could react not only to the Moody's rating cut but to S&P's Thursday afternoon downgrade. U.S. investors had already reacted to the S&P downgrade Thursday, when the stock slipped 0.4%. Bill Quinn, chairman of American Beacon Advisors, said there were differences of opinion about BP among the firm's four subadvisers. Some have reduced their positions since the oil spill, while others are holding on, he said. The managers who still hold it "think the company is a very strong, viable company, with strong cash flows," Quinn said. "Although this is not something you want to go through, at the valuations they're at now, they generally think it's a good investment. As you start to remove some level of uncertainty, that's only going to help." However, some investors remain worried, with possible legal ramifications among their latest concerns as a number of shareholder suits have already been filed and more are expected. "The litigation opportunities are ample," said Alfred J. Kuffler, partner at the Philadelphia law firm of Montgomery McCracken Walker and Rhoads LLP. "Shareholders suits after an event like this where the stock price gets substantially depressed, for better or worse, have become a fixture on our legal scene." -By Donna Kardos Yesalavich, Dow Jones Newswires; 212-416-2188; [email protected] (END) Dow Jones Newswires June 18, 2010 13:36 ET (17:36 GMT)