Are BP Shares Poised for Bull Run?

BP (BP) shares climbed 7% at the end of trading Thursday and could be poised for a bull run.

Since the explosion on the Deepwater Horizon oil rig in the Gulf of Mexico in April, BP stock has fallen to $26.75 -- having hit a 52-week high of $62.38 at the start of the year -- amid investor concerns about clean-up costs and potential liability for claims related to the spill.

But in the last two weeks, BP's shares have recovered to $38.35, a comeback of 43%. Two factors could make that return much larger in the next month or so. The first is obvious: BP appears to have completely stopped the flow of oil from the leak. If relief wells can make that fix permanent, at least shareholders will be comforted that whatever liability BP may face, there won't be another 60,000 barrels a day spewing into the Gulf.

Another reason that the stock could trade up is that BP may soon be successful in selling assets that are not core to its business. There have been several reports that the company will sell its Prudhoe Bay assets to Apache (APA) for as much as $11 billion, perhaps as early as next week. The transaction would be all cash and would enable BP to boost its war chest without issuing large amounts of debt or selling more common shares. Parting with the Prudhoe Bay assets may be a good move even if BP does not need the money. BusinessWeek reported,"BP said it will concentrate on selling assets outside regions with the most lucrative production growth. Prudhoe Bay's output, once greater than 1.5 million barrels a day, averaged 234,772 barrels a day this month, according to Alaska state tax records."

The best news for BP may be that Kenneth Feinberg, who runs the $20 billion escrow fund that is being established to handle clean-up and liability claims, appears to be pushing payouts in lieu of litigation against BP. He told potential claimants in Louisiana,"I am determined to come up with a system more generous and more beneficial than if you file a lawsuit," according to Bloomberg. While his goal is to help residents and businesses receive fair payments quickly, his approach would also be beneficial for BP.

BP's luck, which seemed to be running out as the flow of oil increased over the last three months, could now be changing.

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