Markets

BP Stock Rallies, but Its Oil Well Partner Anadarko May Be a Safer Play

By Conrad Aenlle

Updated on: July 8, 2010 / 12:30 PM EDT / MoneyWatch

BP is providing fresh evidence, if it were needed, that no news is good news. The stock (BP) has risen nearly 25 percent since June 28 with no meaningful developments, certainly not positive ones, in resolving the Gulf of Mexico oil spill.

Press reports Wednesday highlighted the world tour of BP's chief executive, Tony Hayward, who is hoping to raise $10 billion by selling assets. The proceeds would be used to defray spill-related costs. Hayward was in the United Arab Emirates after stops in Russia and Azerbaijan. Closer to the action, cleanup efforts have been hampered by storms in Louisiana.

Yet BP continues to recover. It's not the first time in recent weeks that the stock has shown resilience in the face of uninspiring news. The strength in the last several days is further evidence that the worst developments in the gulf have been priced in and investors are beginning to look ahead to a more auspicious time when the well has been capped and BP can concentrate on producing and selling oil and writing checks to gulf residents.

BP is still trading at barely half of its value before the Deepwater Horizon explosion in April that created the spill, so the stock should have more room to recover. For those who are unconvinced or just more cautious, the Prudent Speculator newsletter, featured here recently for its generally bullish stock market outlook, recommends the oil driller Anadarko Petroleum (APC).

Anadarko, a 25 percent partner with BP in the gulf well, known as the Macondo project, has seen its stock fall by roughly the same proportion as BP on the same liability concerns, but Prudent Speculator contends that they are unfounded.

"No doubt, the Macondo purchase was unfortunately timed, but the transaction occurred after drilling had already started at a site where Anadarko was not involved with the well design or with the well operation. Yet its shares have been cut in half since the Deepwater Horizon explosion on fears that it will be responsible for massive liabilities resulting from the leaking well. While we are bracing for that possible outcome, we believe there exists a higher probability that the company will avoid the large majority of those penalties because of recklessness . . . by BP in designing and operating the well."
Not sure about any recklessness on the part of BP. Nothing has been determined yet. But the newsletter is right that Anadarko could be a good choice for more safety-conscious bargain hunters in the gulf.