Last Updated Jun 16, 2010 9:15 PM EDT
The Fitch rating service slashed its opinion of BP's debt Tuesday, and on Wednesday the company agreed to suspend dividend payments and set aside $20 billion to cover damage claims resulting from the April 20 Gulf of Mexico oil spill, as President Barack Obama had demanded. Despite it all, the stock closed higher both days.
Apprehension about BP's investment prospects may be softening. A thoughtful piece by James B. Stewart in the Wall Street Journal encouraged BP shareholders to hang on at these levels and only sell on a rally.
Stewart pointed out that the spill has relegated BP to "special situation" status. That's the term used to denote a company that has become none of the above - neither a solid, high-yield value play nor a hot growth story.
In the case of BP, horror story is more like it. The well, a mile below the surface, continues to gush oil, and BP doesn't exactly have $20 billion burning a hole in its pocket. That sum is three times the cash on BP's balance sheet, and it may be nowhere near enough to cover the company's liability.
But Stewart wonders if there's any point in selling the stock after it has already taken such a pounding. BP has lost about half of its value since the explosion of the Deepwater Horizon platform that caused the spill.
What about buying the stock? Stewart doesn't advise that, but anyone who plunks down money for BP shares here is betting on little more than the company remaining solvent and intact, even if all of its profits for the next several years go toward restitution for businesses and individuals and repairing environmental damage.
That's a different proposition from the early days of the crisis, when there was no perceived existential threat and it was assumed that BP would only have to write an immense but affordable check. It was clearly too early to buy the stock then - something I didn't realize not once but twice.
Maybe the third time will be the charm. With mere survival now the mark of success, there may be less risk in buying BP than there might otherwise seem, perhaps far less than the potential reward. The resilience demonstrated in the last couple of days is a strong indication of that.
The outlook for BP remains uncertain, but as Stewart points out, the stock is likely to recover before the well is capped and the extent of the damage, financial and otherwise, can be accurately assessed. If you own BP and want to make a graceful exit, wait until the news improves. If you don't own it and you'd like to take a flier, do it sooner rather than later, before BP stops being a special situation and goes back to being a safe, stable blue chip.