A federal bankruptcy judge’s ruling that Anadarko Petroleum (APC) may have to pay up to $14.2B in damages related to the Tronox spinoff shocked Wall Street, as investors erased nearly $4B from APC’s market cap Friday.
U.S. officials say the award would be the largest ever in a bankruptcy case for federal environmental claims and liabilities, and it ranks among the largest environmental enforcement awards in U.S. history.
A likely appeal could bring years of legal wrangling, prompting calls for a settlement, which is perhaps what the judge is attempting to motivate; otherwise, APC faces a substantial overhang on its stock price - possibly for as long as 10 years, Citigroup says.
The ruling ruined APC’s own $1.4B estimate of exposure in the case; if more money is needed to cover damages, APC could sell low cash-generating assets in Mozambique, Brazil and elsewhere for a combined $18B, leaving it with excess cash even in the face of a large judgment, Tudor Pickering says.
Even a worst-case scenario isn't likely to torpedo APC, but the next question may be whether it might be weak enough to draw an unsolicited takeover bid.