Settle On These ETFs For The BP Settlement (BP, OIH, HAL)
Shares of BP (NYSE: BP), Europe's second-largest oil company, are looking good today after the British oil giant agreed to dole out $7.8 billion in settlement claims tied to the 2010 Gulf of Mexico oil spill.
While not an admission of liability by BP and by no means the end of BP's legal proceedings related to the largest oil spill in U.S. history, news of the settlement is clearly being viewed as more good than bad. The more cash BP can keep from going out the door for spill-related expenses, the more the company can bolster its balance sheet and look to assuage skittish investors by raising its dividend and devoting more financial resources to exploration and production projects.
Almost back from the dead, shares of BP aren't too far removed from their 52-week high and have represented a bet better than comparable oil stocks and the S&P 500 in 2012. Consider these ETFs for BP exposure and if there is more good news for the other offenders involved in the Gulf spill legal proceedings.
Market Vectors Oil Services ETF (NYSE: OIH) The Market Vectors Oil Services ETF is a new version of the old Oil Services HOLDRs and like the HOLDRs fund, the new OIH is currently excessively weighted to just one stock. Now it's Schlumberger (NYSE: SLB), which represents over 19% of the ETF's weight, that is OIH's largest component.
Even with that, Halliburton (NYSE: HAL), the company that was tasked with providing cement services for the Macondo well, and Transocean (NYSE: RIG), the owner of the Deepwater Horizon rig, combine for about 15% of OIH's weight. That's significant because those two companies are still fighting with BP over who exactly is to blame for the spill. To that end, both companies are sensitive to spill-related legal news at this point, Transocean arguably more so.
SPDR S&P International Energy Sector ETF (NYSE: IPW) IPW has lower volume than its primary rival, the iShares S&P Global Energy ETF (NYSE: IXC), but IPW has plenty of uses of its own. In the context of BP, IPW is actually far more useful than IXC because the SPDR offering features a 10.3% allocation to BP. That's about double what IXC offers.
IPW offers one of the largest weights to BP, much larger than even the iShares MSCI U.K. Index Fund (NYSE: EWU).
Vanguard MSCI Europe ETF (NYSE: VGK) The Vanguard MSCI Europe ETF makes the list not because it features a large weighting to BP (it does not), but because the ETF features modest allocations to almost all of the major publicly traded oil companies based in Western Europe. In addition to BP, Royal Dutch Shell (NYSE: RDS-A) and Total (NYSE: TOT) are top-10 VGK holdings. The idea here is some good news for BP might provide a near-term boost to its rivals as well.
iShares MSCI ACWI ex US Energy Index Fund (NYSE: AXEN) On the surface, AXEN may not appear to be much different than IPW and IXC, but AXEN does feature BP as its largest holding and has a modest allocation to Transocean. AXEN also features some exposure to emerging markets oil stocks to differentiate itself from rival ETFs. The biggest issue with AXEN is volume. Average daily turnover is barely more than 420 shares and the bid/ask spread as of this writing is over 50 cents.
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