Is it time to sell BP?

BP (BP:NYSE) which is known to stand for British Petroleum, may now have the nickname Broken Pipe due to the recent pipe explosion in the gulf of Mexico causing the biggest environmental disaster of all time.

BP failed to insert a trigger switch at the source of the oil pipe which would have in-fact stopped the oil from leaking immediately. This trigger switch was taken out of the regulation while Bush was in office and is a necessary requirement for drilling in most parts in the world. While BP was making record profits they decided they did not want to spend the $500,000 it costs to place the trigger switch at the source which will now cost them a number which some analysts say is unforeseeable.

To sell or not to sell? That is the question.

May 27 - BP (BP:NYSE) was upgraded to Outperform from Perform at Oppenheimer, which said the stock's risk/reward appears more attractive at current levels. $55 price target.

BP is expecting lawsuits from some of the largest fish farmers in the world. BP has also filed a claim with a US court trying to get damages against Transocean, (NYSE:RIG) the company in charge of drilling the oil well.

BP's "top kill" attempt to stop the flow of oil from a ruptured well in the Gulf of Mexico failed. Presidential adviser Carol Browner yesterday dampened expectations that renewed efforts to plug the leak would work, saying oil could leak until August when two relief wells are due to be completed.

The bill for BP, to compensate those who have experienced losses during the spill and for the cost of the cleanup is projected to be approximately $12 BLN says USB.

What does a $12 BLN hit mean for BP?
At the end of Q1 2010 BP has approximately $6.8 BLN in cash and $5.4 BLN in short-term investments bringing free cash flow of around $12.2 BLN. The total assets including long term investments for BP is at approximately $240 BLN which outweighs the liabilities by nearly $100BLN.

If the bill were to be $12BLN it can easily be sustained by BP, while taking a short-term fundamental hit the company can once again thrive in the long-term.

Mr. Stock Picks thoughts on the situation:

This spill is a growing disaster for BP. While the share price has fallen tremendously giving it an attractive 8% yield I feel like I need to stay away from it for now. The Obama administration has a lot of power and I can see a new oil drilling tax coming in place in the near future. Solar and Wind energy anyone? I will do some analysis on some green energy companies as I can see them benefiting most from this environmental crisis.

Video of oil leaking:

Question for you readers to comment on below:

Will BP go Bankrupt?
How big of a liability will this oil spill be?
Are you a buyer or a seller?

Mr. Stock Pick