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5 Stocks Impacted By The BP Settlement

When the news broke that BP had entered into a tentative settlement with oil spill plaintiffs, I wondered how some of the other companies that were involved in the oil spill disaster were faring. This article will examine the five companies that had the largest liability exposure as a result of the disaster. These companies are all large cap, energy related companies whose stock could be affected by the settlement news.

BP (BP) has a market cap of $150.24 billion with a price to earnings ratio of 5.89. The stock has traded in a 52 week range between $33.62 and $49.09. The stock is currently trading around $48. The company reported fourth quarter revenues of $96.4 billion compared to revenues of $84 billion in the fourth quarter of 2010. Fourth quarter net income was $7.6 billion compared to net income of $5.5 billion in the fourth quarter of 2010.

One Of BP’s competitors is Exxon Mobil (XOM). Exxon is currently trading around $86 with a market cap of $406.89 billion and a price to earnings ratio of 10.25. Exxon pays a dividend which yields 2.2% versus BP whose dividend yields 4%.

BP is a British company that ranks as one of the largest energy companies in the world. The company increased its fourth quarter year-over-year revenues by 14% and its net income by 38%. In 2011, the company’s full year-over-year revenues increased by $78 million and net income increased by $29 million. BP earnings were badly impacted as a result of the April 20, 2010 Macondo oil spill disaster. BP took an accounting write-off of $37.2 billion to cover the cost of the disaster. The company has been working to get the disaster behind it and just announced that has a tentative settlement agreement with plaintiff's lawyers for $7.8 million. The settlement will be paid out of a claim trust fund that BP funded with $20 billion. The trust fund now has a balance of about $9.5 billion in assets. This settlement which has not yet been approved by the courts, will probably be considered as a major step by BP towards getting the oil spill disaster behind it. BP must still resolve lawsuits with federal, state and local governments and address environmental damages. Even though BP still has considerable legal hurdles ahead of it, I expect the stock price to move higher. BP stock price has moved higher by 84.5% from its post Macondo lows. Prospective investors should do further research.

Cameron International (CAM) has a market cap of $13.65 billion with a price to earnings ratio of 26.53. The stock has traded in a 52 week range between $38.77 and $63.16. The stock is currently trading around $55. The company reported fourth quarter revenues of $2 billion compared to revenues of $1.8 billion in the fourth quarter of 2010. Fourth quarter net income was $100 million compared to net income of $164 million in the fourth quarter of 2010.

One of Cameron’s competitors is National Oilwell Varco (NOV). National Oilwell is currently trading around $82 with a market cap of $34.89 billion and a price to earnings ratio of $17.5. National Oilwell pays a dividend which yields 0.6% versus Cameron which does not pay a dividend.

Cameron provides flow equipment products, systems, and services worldwide. Their products include wellheads and oil well blowout preventers. In the fourth quarter, the company increased year-over-year revenues by 11% but saw its net income decrease by 64%. Cameron increased revenues in 2011 by 13% and expects to significantly increase revenues in 2012. The company has made capital investments in Brazil, the Far East and the North Sea. Renewed drilling in the Gulf of Mexico will also increase the company’s bottom line. Cameron which provided the blowout preventer that was involved in the Macondo oil spill disaster, settled a lawsuit with BP for $250 million in December of 2011. The settlement cost lowered the company’s fourth quarter EPS by $0.37 per share. Since the December 15th announcement, the stock price has increased by 23.5%. Now that Cameron has settled it suit with BP, and can benefit from higher oil prices and renewed drilling in the Gulf of Mexico its future looks bright. Prospective investors should do further research.

Transocean (RIG) has a market cap of $18.99 billion with a negative price to earnings ratio. The stock has traded in a 52 week range between $38.21 and $85.17. The stock is currently trading around $54. The company reported fourth quarter revenues of $2.4 billion compared to revenues of $2.1 billion in the fourth quarter of 2010. Fourth quarter net income was $-5.9 billion compared to net income of $-808 million in the fourth quarter of 2010.

One of Transocean’s competitors is Seadrill Limited (SDRL). Seadrill is currently trading around $40 with a market cap of $18.61 billion and a price to earnings ratio of 13.28. Seadrill pays a dividend which yields 6% versus Transocean whose dividend yields 5.8%.

Transocean is a provider of deep sea oil rigs. Transocean owns more oil rigs than any other company. In the fourth quarter, Transocean increased its revenues by $300 million but saw its net income decrease by a staggering $6.7 billion. A key reason why earnings were so poor is because Transocean has an aging fleet of oil rigs which incurred extensive repair cost. Transocean’s aging fleet also resulted in lowered revenues due to a high rate of vessel downtime. Transocean provided the Horizon oil rig which was involved in the Macondo oil spill disaster. Even though Transocean still faces significant legal hurdles, as a result of its involvement in the oil spill, recent legal decision seemed to have reduced Transocean’s potential liability. Investors have taken notice, and the stock price has increased by almost 40% since mid December. This is despite the fact that on February 20th, the company announced that it would not recommend dividend payments for the 2012 calendar year. If Transocean can successfully complete fleet repairs, and reduce downtime, it should be able to significantly increase earnings. Prospective investors should do further research.

Anadarko Petroleum (APC) has a market cap of $41.15 billion with a negative price to earnings ratio. The stock has traded in a 52 week range between $57.11 and $88.70. The stock is currently trading around $83. The company reported fourth quarter revenues of $3.8 billion compared to revenues of $2.7 billion in the fourth quarter of 2010. Fourth quarter net income was $-358 million compared to net income of $111 million in the fourth quarter of 2010.

One of Anadarko’s competitors is Conoco Phillips (COP). Conoco is currently trading around $78 with a market cap of $99.57 billion and a price to earnings ratio of 13.28. Conoco pays a dividend which yields 3.4% versus Anadarko whose dividend yields 0.4%.

Anadarko is a major oil and gas exploration company. In the fourth quarter, the company reported net income of $-358 million. A large portion of the loss was attributable to increased exploration cost, as the company spent around $5.6 billion to increase its oil reserves by 159%. Anadarko has started a new and potentially lucrative project in Mozambique and has high hopes for its US Eagleford Shale and Wattenberg Shale projects. Anadarko is attempting to move past the Macondo oil spill disaster in which it partnered with BP. On October 17th, the company announced that it had settled with BP for $4 billion. Anadarko’s CEO Jim Hackett said, “This settlement agreement with BP is the right action for our stakeholders, as it removes significant uncertainty regarding future liabilities and associated risks," If oil prices remain high, Anadarko’s stock price could move higher. Anadarko’s stock price has moved up by 3.25% over the last 52 weeks. Prospective investors should do further research.

Halliburton (HAL) has a market cap of $32.82 billion with a price to earnings ratio of 11.53. The stock has traded in a 52 week range between $27.21 and $57.77. The stock is currently trading around $36. The company reported fourth quarter revenues of $7 billion compared to revenues of $5.1 billion in the fourth quarter of 2010. Fourth quarter net income was $906 million compared to net income of $605 million in the fourth quarter of 2010.

One of Halliburton’s competitors is Schlumberger N. V. (SLB). Schlumberger is currently trading around $76 with a market cap of $101.7 billion and a price to earnings ratio of 20.79. Schlumberger pays a dividend which yields 1.4% versus Halliburton whose dividend yields 1%.

Halliburton provides products and services to oil and gas exploration companies. In the fourth quarter, the company increased year-over-year revenues by 37% and net income by 49%. Halliburton has increased revenues in each of the last 10 quarters and increased its 2011 net income by 38.5%. Halliburton was involved in the Macondo oil spill disaster because it provided the cement that was used in the well head. Halliburton may still have to pay liability cost as a result of the disaster, but on January 31st U.S. District “upheld Halliburton's claim that its contract with BP requires BP to defend and indemnify Halliburton against any and all claims related to a blowout or uncontrolled well condition and relating to pollution and/or contamination from the reservoir.” Despite strong earnings Halliburton’s stock has performed poorly and is down by 22% over the last 52 weeks. News of BP’s $7.8 billion settlement does not directly affect liability claims against Halliburton, but it probably bodes well for Halliburton’s future. Prospective investors should do further research.

About the author:

StockCroc
I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.

I fundamentally analyze every business from the top down.

In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.

Visit StockCroc's Website


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