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  • Stock Market Watch Starting March 5: Revisiting The Exxon Valdex Oil Spill In The Wake Of The BP Plc (BP) “Settlement” 0 comments
    Mar 7, 2012 12:59 AM | about stocks: HAL, RIG, XOM, BP

    BP Plc (NYSE:BP) has just announced an agreement to pay $7.8 billion out of a $20 billion trust to settle more than 100,000 individual and business claims stemming from the 2010 Deepwater Horizon oil spill but before investors get too excited, it's worth remembering the 1989 Exxon Valdex oil spill.

    Specifically, consider how the March 1989 Exxon Valdex oil spill lawsuits dragged on - for nearly 20 years and all the way to the Supreme Court. Initially and in the case of Baker v. Exxon, an Anchorage jury awarded $287 million for actual damages plus $5 billion for punitive damages. After lengthy appeals, the punitive damages award was cut to $4 billion in 2002 and then $2.5 billion in 2006. In 2008, the Supreme Court vacated the $2.5 billion award and punitive damages were limited to the compensatory damages - calculated as $507.5 million.

    Naturally this created a firestorm of criticism from some political corners but given that the Exxon Valdex oil spill happened nearly 20 years before, the public along with investors probably took little notice of it. Moreover, Exxon did end up recovering a significant portion of its clean-up costs and legal expenses through insurance claims and up until recently, its successor, Exxon Mobil Corporation (NYSE:XOM), was the largest publicly traded company in the world and one of the most profitable.

    Of course, the Deepwater Horizon oil spill is a more complex case as Halliburton Company (NYSE:HAL) and Transocean (NYSE:RIG) both share at least some of the blame for what happened and are in turn being sued by BP Plc (BP). Likewise, BP Plc (BP) still faces plenty of pollution fines from the Department of Justice along with each of the five states impacted by the oil spill. Moreover, BP Plc (BP) or British Petroleum is and always will be an easier political target (or punching bag) given that it's a foreign company.

    On the other hand and unlike Exxon, BP Plc (BP) has plenty of reasons to quickly want to put the Deepwater Horizon oil spill behind it with the number one reason being that the price of oil is back over $100 a barrel. Given higher oil prices, BP Plc (BP) certainly does not want to be banished from the rich deepwater oil fields in the Gulf.

    Hence, investors and traders alike might want to add BP Plc (BP) along with Halliburton Company (HAL) and Transocean (RIG) to their Next Candle "My Portfolio" watchlist as any of these stocks could make a directional change as the fall out from the Deepwater Horizon oil spill is likely to continue dragging on.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: HAL, RIG, XOM, BP
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