BP Stock: Sloppy Is As Sloppy Does

Lake Michigan spill is just another reason to dump BP stock

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BP Stock: Sloppy Is As Sloppy Does

Already, lawmakers and several private citizens have started the drumbeat of lawsuits and inquiries into the spill and BP’s continued poor environmental practices.

While the facility is technically located in Indiana, the proximity of the refinery in Chicago has many Illinois Senators taking action. Republican Mark Kirk and Democrat Dick Durbin have already demanded to speak with BP executives and have been seeking full disclosure records on the spill. The duo has ordered an investigation into how the refineries recent expansion to process more oil sands crude will affect BP’s ability to handle and clean-up future spills. Perhaps more importantly, the Senators said they plan to hold BP fully accountable for future leaks.

This echoes similar demands made by Chicago mayor Rahm Emanuel. Emanuel has demanded similar actions from BP, saying he “didn’t want BP taking chances on the lake.” Lake Michigan provides the bulk of Chicago’s drinking water.

Meanwhile, private groups are already going to bat over the spill. The facility has already been host to series of air pollution lawsuits from citizens in downtown Chicago. Several of these lawsuits are expected to be expanded to include the recent spill. Others have demanded and threatened “right to know” investigations on what threats the spill poses for the region’s water supply.

All in all, the proximity of the refinery to such a huge urban population may prove to be just as big of headache as the Deepwater spill.

Still Not Liking BP Stock

For BP stock owners, it seems like the company just can’t catch a break. The firm just recently got back into the good graces of the EPA and was allowed to bid on new blocs in the Gulf of Mexico. While it did manage to secure some offshore drilling rights, this spill could come back to haunt it. The EPA might not take too kindly to BP’s recent backtracking as an environmental polluter, and any resulting lawsuits from this spill could once again prevent it from bidding or expanding its U.S. operations.

At the same time, that $20 billion fine from the 2010 spill is still hanging over its head. Analysts still believe there’s a good chance that BP will be found guilty of gross negligence. Any extra money that BP will be forced to pay out based on this smaller spill could really sting after paying out those billions four years ago.

And with opposition to oil sands production growing in the U.S. — remember that pesky Keystone XL pipeline? — things don’t look good for BP stock.

With that in mind, BP stock is certainly cheap at a current P/E of less than 7. But that valuation metric could change as the firm is forced to deal with another round of environmental litigation or regulation at its Whiting refinery.

Spills and accidents do happen in the energy sector; it’s a fact of life. But BP’s environmental record isn’t necessarily scoring any friends in the public and private sector. Ultimately, that puts BP stock in the “don’t buy” camp.

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/2014/04/bp-stock-oil-spill/.

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