It’s finally time for large, independent energy producer Anadarko (APC) to get some respect. That is, if it doesn’t get bought out first. A huge legal win is finally making possible what analysts have been predicting for years.
Like BP (BP), APC stock has been bogged down by various environmental legal issues stemming from an ill-timed purchase. However, unlike BP — which continues to get under the EPA’s and activists skins — Anadarko has finally made good on its legal woes.
And with a settlement now in place, APC is set to shine as one of the largest independent explorers of oil & gas. It also has the potential to be one of the largest corporate buyouts in history.
Either way, the coast is clear for investors looking to add APC stock to their portfolios.
A Big Legal Win For APC Stock
Anadarko’s issues can be traced back to 2006 and its purchase of Kerr-McGee’s oil and gas assets. APC paid nearly $17 billion — including an estimated $1.6 billion worth of debt and other liabilities — for the assets. That purchase was an integral part of former CEO Jim Hackett’s plan to expand Anadarko into an independent giant.
The assets were good deal for APC in terms of reserves and production. Unfortunately, they came with a toxic legacy.
Three months before selling itself, Kerr-McGee spun off its chemicals business and a paint pigment facilities into Tronox (TROX) back in 2005. With it, Ker-McGee placed much of its old environmental liabilities with new firm. Those liabilities — which include fouling over 2,770 sites across the country since its founding in the 1920’s — eventually caused TROX to file for bankruptcy protection.
TROX later sued APC and Ker-McGee, alleging that management purposely duped shareholders by placing all the bad into the new chemical firm while pulling just the top “clean” assets of the top. The EPA and Justice Department agreed and later Anadarko found itself staring down the barrel of gun.
As the court case progressed, initial estimates for fines were upwards of $25 billion and some analyst postulated that APC could be headed for a potential breakup or bankruptcy.
So, when Anadarko announced that it would be only on the hook for $5.15 billion due to a settlement with Department of Justice, shares of APC stock surged nearly 15%.
Things Are Looking Good APC Stock
With the taint of Kerr-McGee and TROX now removed from its face, Anadarko is ready to rock and roll as an independent energy firm. It also makes APC stock a very big buy for investors.