Reuters | BP shares moved higher for a second straight day Friday as investors
apparently dismissed new estimates that the oil spill in the Gulf of
Mexico could be far worse than previously thought and reports the
company may defer its second-quarter dividend.

BP shares rose $1.19, or 3.6 percent, to close at $33.97 in New York. The shares climbed as high as $34.46 during the session.

The Financial Times reported that BP’s board will meet Monday to discuss deferring its second-quarter dividend and putting the money into escrow until the company’s liabilities from the spill are known.

“The board has been meeting (usually by conference call, rather than physically) weekly since this crisis started,” BP spokesman Robert Wine told The Associated Press. “They will discuss a range of subjects on Monday which may or may not include the dividend. So far, no decision has been taken.”

BP executives, including CEO Tony Hayward, are scheduled to meet with senior administration officials in Washington on Wednesday. President Obama is expected to attend a portion of the meeting.

The two-day rally in BP shares started when the stock jumped 12.3 percent on Thursday after a 15.8 percent slide to $29 on Wednesday. That was its worst drop since the spill began back in April, to prices not seen since 1996.

Analysts have said that the stock has been oversold on fears that the costs of the spill will wipe out the company.

“A rational analysis suggests that, despite the uncertainty, the market’s reaction has gone way overboard,” said analyst Mark Gilman of the Benchmark Company.

Even with the recent rally, BP shares have lost $82 billion in value since the explosion on April 20.

Analyst Alex Morris of Raymond James said if BP cuts or suspends its dividend it could take some heat from Washington off the company.

“It’s kind of counterintuitive, but the market hasn’t exactly been reacting rationally to this whole saga,” he said in an e-mail.

“We never thought (and still don’t) that BP as a going-concern is threatened, but this week the market showed it’s scared to death of a potential bankruptcy.”

Analyst Michelle della Vigna of Goldman Sachs said BP shares can go up from here even under his worst-case scenario that has BP paying $70 billion in damages.

“This suggests that risk/reward is currently tilted to the upside, given there is still value in the shares, even at very conservative damage assumptions,” the analyst said in a research note.