BP (BP.) has suffered some serious setbacks, and the company's reputation has been damaged. There is of course justification for this: the financial costs of the Macondo oil spill have destroyed a lot of shareholder value, and the oil spill could even prevent the company from receiving new drilling licences in the Gulf. Further, the collapse of its strategic agreement with Rosneft at the hands of its TNK-BP partners created further embarrassment. This deal's failure highlights both the risks of its Russian joint venture (which makes up more than a quarter of the company's total production) as well as the unique challenges BP faces in growing its production and reserves. Despite these major issues, BP's underlying business remains sound and the company still generates significant cash flow. If the company's production outlook improves and Macondo costs prove to be less than expected, it could very well turn out that its shares have been oversold. Further, additional asset sales, specifically its large North American refineries, could also prove to be near-term share catalysts.
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