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BP Stock Still a ‘Sell’ as Legal Quagmire Continues

While BP has gotten a partial victory recently, the potential for monster fines in another piece of the case still looms

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Under the Clean Water Act, fines for simple negligence would be $1,100 for every barrel spilled, but as much as $4,300 per barrel if a company is found to have been grossly negligent. If the Justice Department has its way, BP could be on the hook for around $18 billion in fines stemming from this piece of the trial … and things aren’t looking so hot for BP based on testimony so far.

According to James Dupree — BP’s manager in charge of controlling the Macondo blowout — many on the team were never trained to permanently plug a ruptured oil well, and the British company was not fully prepared for such an enormous oil spill. Dupree was directly quoted as saying under oath, “I had no formal training in well-kill operations.”

Additionally, prosecutors provided evidence that BP lied about its flow rate estimate of a 5,000 barrels per day — which was much lower than what some internal models were telling BP engineers. According to emails and other internal documents, several BP engineers predicted that the flow rate could have been as high as 100,000 barrels per day.

Meanwhile, both Halliburton (HAL) and Transocean (RIG) — contractors on the project — have also voiced their opinion and provided evidence that BP has lied about the flow rate and delayed the final capping of the well.

The Saga Continues for BP Stock

While BP scored a major victory with the settlement claims injunction, the big battles are still being fought, and things don’t look good on that end. If the company is found grossly negligent in its duties to cap the spill, BP stock could be put in a hurt locker thanks to massive fines … not to mention any other lawsuit that might arise from that fact. In fact, some analysts still predict that BP will have to sell off some assets to continue paying for the legal overhang and potential claims.

Despite its rising share price since 2010, I still can’t get behind BP stock as an investment. All oil and natural gas companies have legal issues from one time or another, but the continued Macondo saga isn’t good. BP continues to be forced to focus solely on this spill, while other firms — such as ConocoPhillips (COP) or Hess (HES) — continue to drive production gains and profits.

There are several large energy firms that are worth an investment. Right now, BP isn’t one of them.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/10/bp-stock-oil-spill-lawsuit/.

©2014 InvestorPlace Media, LLC

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