British Petroleum is out with its Q1 earnings, and a burgeoning number of analysts like what they see -- so much so, that some are touting BP as a great rebound play.

BP certainly seems to be on the upswing. On May 3 it got the court ruling it wanted on the Deepwater Horizon Gulf of Mexico spill back in 2010. A New Orleans District Court judge gave BP preliminary approval of a $7.8-billion settlement to alleviate about 100,000 claims against the oil giant.

U.S. District Judge Carl Barbier split the settlement into two parts: one part for property claims and the other to cover healthcare expenses. What the agreement doesn’t cover are costs incurred by the federal government and by states impacted by the Gulf oil spill. While those costs could be billions, the consensus on Wall Street is that the legal costs associated with the Deepwater spill are “baked into” British Petroleum’s stock.

“The Gulf of Mexico spill in 2010 and the proposed Russian Arctic in 2011 have clearly weighed on BP shares,” said hedge fund analyst Lalit Sharma in a recent research note. “However, I believe most of the negatives are already priced in at these levels. Going forward I believe risk-rewards are skewed toward the upside. Given BP's diverse oil and gas portfolio and financial flexibility, I believe it can easily weather any reasonable cost estimates for the spill.”

BP’s share price is hovering around the $41 per share mark this week, down from a high of $48 per share in early March. Analysts peg the one-year target estimate of $53 per share on the theory that the worst is behind BP from the Gulf of Mexico spill.

Barclays did downgrade the stock on May 8, but as the analysts’ outlook notes, the longer-term outlook for BP as a rebound stock seems fairly bright.

One reason for that is the company’s bullish outlook in natural gas. StockCall.com, an investment analysis firm, says a continuing decline in natural gas prices actually works out well for BP.

“Natural gas prices have remained low during the first quarter of 2012, however the low pricing environment has led to many switching over to natural gas, which bodes well for major integrated oil and gas companies in the industry such as BP plc,” writes StockCall in an April 27 research report.

Noting that “mild weather” may limit the gains on natural gas stocks, StockCall says BP is still well suited to benefit on a gradual basis, as more and more customers--both retail and commercial--turn to cheaper natural gas.

“Many companies have continued with natural gas projects despite low prices, and have been achieving positive results,” notes the firm. “BP has also been active in terms of natural gas operations, recently announcing that the Shah Deniz consortium is going to go forward with the Front End Engineering and Design on the Shah Deniz Stage 2 project. BP operates the project, which it has been approximated contains over 30 trillion feet of gas resources.”

Another reason for BP’s rebound capabilities: continuing high oil prices, at least by the estimates of Wall Street money managers. The New York-based Paragon Report, which issues frequent forecasts on oil company stocks, is leading that school of thought.

“Analysts are predicting an increase in earnings for the major oil companies, as concerns about oil supplies in the Persian Gulf have driven crude prices higher,” says Paragon. “The Brent crude benchmark, used by oil companies to price their production, traded at an average that was 12 percent higher than the same period last year.”

Oil is trading just below $100 per barrel, mostly on a souring outlook on the European economy and a sliding U.S. gross domestic product number last month. But economists say global demand for oil is still ample, and that oil prices should climb back above $100 by this summer.

“The fundamentals of supply and demand indicate that $100 a barrel is a fair price," said Kuwaiti Oil Minister Hani Hussein in an interview with the Middle East news agency al-Rai on May 8. He added that geopolitical stress could soon drive oil prices even higher.

But even if that doesn’t happen, BP has an insurance policy -- it’s favorable 4.7% share price yield. If oil does come down, that’s likely a response to a declining economy on both sides of the Atlantic. Investors will likely flee to defensive-minded value stocks with a great dividend yield -- and BP certainly fits the bill there.

Here’s a look at how BP’s dividend yield compares to its peers:

------------------------------------------------------------------------------------------------------

Company Stock Price (May 8, 2012) Div. Yield%

BP $41 4.70%

Exxon $84 2.70%

Chevron $102 3.50%

ConocoPhillips $53 5.00%

-----------------------------------------------------------------------------------------------------

Of the four oil giants, only Conoco has the better dividend yield, and only marginally.

On the downside, BP’s first-quarter results weren’t well received on Wall Street, as BP suffered a 6% drop in production for the quarter, and saw its replacement cost of operating profit fall by a disappointing 13%, to $4.8 billion. Analysts had projected BP’s RCOP number to come in at $5 billion, exactly where it was the for the previous quarter.

But once again, BP is taking the long view. “We have made a good start against our strategic priorities for 2012,” said group chief executive Bob Dudley in a May 1, 2012 statement. “During the quarter we gained access to significant new deepwater and U.S. shale exploration acreage, our ongoing divestment program has reached $23 billion, and we have five deepwater rigs at work in the Gulf of Mexico. This operational progress will underpin the financial momentum we expect to come through as we move into 2013 and 2014.”

The London investment firm Hargreaves Lansdown, in a research post last week, said that the Deepwater Horizon hangover isn’t entirely gone, but it’s well on the way, and so might be BP’s stock price. Lansdown notes that BP’s planned asset sales, at 60%, are on target, new exploration projects are on the docket and cash commitments to the Gulf of Mexico spill are finally abating. “Furthermore, like rivals, profitability for downstream operations improved compared to the prior quarter,” says Lansdown. “Finally, despite ongoing legal uncertainty in relation to the Gulf of Mexico accident, an increase in the dividend appeared to reflect long-term management confidence.”

Yes, BP has to face the financial fallout from the Deepwater Horizon spill, and yes, its share price has been in general decline recently. But if, as traders say, BP has baked the price of the Gulf of Mexico oil spill’s legal costs into its share price, and that share price is down relative to oil giants, then the thinking goes that a higher bump-up in share price will also mean a higher dividend payout, too – even if that’s a few years down the road.