BP is one of the largest and most important oil producers and exporters in the world. As much as profits and cashflow go, the company performs well, it has nice growth and handsome dividends. However I would not invest in this company long term. This is a company that consistently fails to comply with the safety regulations, gets into accidents and into trouble with governments. Just within the last two years the company generated a lot of heat from U.S. and Russian governments and I don't know how safe this company is for investing.
Let's review some of the incidents related to this company since year 2000.
- In 2005 in Texas City, Texas, an explosion in the refinery caused 15 employees their lives and another 170 to be injured. The investigations found out that the company was at fault. The company was letting go of some safety measures in order to cut some costs and it ended up paying a much higher price than it would have. One of the lawyers in the case said "The reality is that BP has a long history of underinvesting and reinvesting in their infrastructure."
- In 2005 when Hurricane Dennis hit one of BP's offshore platforms it toppled the platform. At first the incident was blamed on the hurricane but later the investigation found negligence by BP's engineers in installing valves that were meant to protect the platform from too much water flow in the platform.
- In 2006, in Prudhoe Bay, Alaska, hundreds of thousands of gallons of oil was spilled as a result of a bursting pipeline at a BP refinery. After the investigations, BP pleaded guilty and had to pay a fine of 20 million dollars. The company had engaged in negligence once again.
- Between September 2008, and November 2009, three different incidents of pipeline clog or rupture happened in BP's oil fields in Alaska, according to a letter sent two congressmen. None of the incidents resulted in any injuries but they still show the company's habitual negligence of safety measurements.
- In 2010, the oil spill in the Gulf of Mexico occured. It caused deaths of individuals and had a huge environmental impact. After the incident, the U.S. government ended up closing Gulf of Mexico to oil drilling for a long time. The company will pay huge amount in fines.
Besides accidents, the company also has an interesting record of political incidents. The company's offices in Russia got stormed by cops, it had to pay fines to people in many countries including the U.S. and Colombia, and it usually finds a way to get in trouble one way or another.
Since 2010 the company has been clear of trouble, but I still need more time to have confidence in this company. What if one day we wake up, hear another BP incident and BP shares plunge big time as has already happened multiple times? I will be extra cautious about buying this company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.