Reports suggest BP plans to buy back $6 billion in stock. The move tends to nudge up the share price, which it has.
It’s a common step in the corporate acquisition dance — when a company senses buyers out there, says fund manager Colin McLean at SVM Asset Management. BP’s value to potential suitors: It’s a low-cost source of oil production.
“It would be a cheap way of buying barrels of oil already discovered and cash flows you know, for someone to buy BP,” says McLean.
In recent months, BP’s untangled itself a bit from a headache Russian investment. As for the Gulf spill, the company will pay $4.5 billion to settle criminal and some civil charges.
“We’re relatively close to perhaps resolving some of those issues. It may even be that if the remaining issue is a U.S. one that an acquirer from the U.S. might be better placed to resolve that or understand that,” says McLean.
That refers to environmental liability in the Gulf. A trial’s scheduled for February. After that, BP’s future could clear up as a more stable, smaller firm. At this price, BP may stand for Bargain Petroleum.