Despite lower profits, BP is seeing rise in stock price.
BP (BP) is often considered the least successful of Big Oil companies. It had the lowest profits of the major Big Oil companies last quarter. Indeed, with a $3 billion profit, it couldn't come close to Exxon (XOM) in terms of oil company profits. But despite this fact, BP was up Wednesday morning on the stock market while Exxon, Chevron (CVX) and ConocoPhillips (COP) are all dropping.
Perhaps BP is experiencing a bit of a boost from the fact that the company insists that it will be cutting costs. BP plans to get rid of 5,000 jobs. Unfortunately, this may not lead to more profits in the long run. While $3 billion in profit is still a profit, BP would have had more than $4 billion in profits last quarter if not for the fact that it sustained losses from a payout resulting from the 2005 deaths of 15 workers at a Texas BP refinery.
Stock prices tends to reward "cost-cutting." But cost-cutting now could lead to increased costs later. Before deciding on BP, it is important to look at its record. PRNewswire reports on BP's cost-cutting record:
BP's earlier excessive penny-pinching on both safety and maintenance was blamed for the Texas City disaster and its Alaska pipeline shutdown in 2006," said Judy Dugan, research director of the Foundation for Taxpayer and Consumer Rights. "The company says it is only cutting corporate jobs, but since safety oversight is not a profit center, BP risks the same bad judgment that led to Texas City. ...BP has remained relatively stable; its rising stock prices are some of the lowest among Big Oil companies. Even when it's rising, BP stock doesn't make huge leaps and circumstances often force BP stock to drop again later. Its valuation is not considered particularly good as a result.