BP Faces New Pressures from Texas Residents
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BP (NYSE: BP) is facing litigation from 50,000 Texan residents regarding allegations that it caused widespread illness in the state.
50,000 people claim that they have been made ill as a direct result of a 41 day period of emissions from one of BP's refineries. The refinery in question was the site of a disastrous explosion, which is also the cause of the emissions. Apart from the class action lawsuit made up of exactly 53,800 plaintiffs (and marking this out as the case with the largest number of plaintiffs contained in one lawsuit), the state of Texas as a whole has also sued the oil giant. The EPA is also investigating. According to the state of Texas, the refinery released "500,000 pounds of chemicals, including carbon monoxide and benzene." This occurred in April and May, 2010, and has only recently come to our attention as, up until now, the BP oil spill has taken center-stage in terms of BP's scandals and wrongdoings.
Among the symptoms reported by plaintiffs in the case are "allergic reactions, sinus infections, headaches, nosebleeds and other symptoms." These are all what you may call 'small scale' illnesses, although they are far from being insignificant. What makes the case interesting is that the origin or cause of these small illnesses will be hard to prove. This could work in BP's favor.
The release of emissions occurred at a time when BP was battling the Gulf of Mexico oil spill. Consequently the company may not have had all of the resources and attention needed to properly address the issue. The company is simply unable to get past lawsuits related to its wrongdoing. All of these events combined could possibly lead to the downfall of the company.
BP maintains that no one was harmed by flaring in Texas, quoting the results of air monitors near the refinery as evidence of this. The company has also made it clear that it will defend itself in the upcoming court case rather than settle out of court as it feels that its innocence will be proven. For the sake of the company and its investors I hope this is true. It could simply be a large scale attempt by a number of people to attack a vulnerable target. Or the majority of the 50,000 people are telling the truth and BP will have to pay out for the damages caused by the release of emissions from its refinery. At this point we do not have a clear idea about when the trials will take place, but I feel that it is unlikely to expect them to begin until late this year or early next year.
BP is not the only oil and gas company that is suffering financially as a result of the Gulf of Mexico oil spill. Companies like ATP Oil & Gas (NASDAQOTH: ATPAQ.PK) have experienced significant losses as a result of the US government suspending licenses to drill in the area. It has now been more than two years since the spill, and these suspensions are causing a great loss to ATP. In response to this ATP has filed a lawsuit against the government for an amount of $68 million in order to recoup its losses. The stock jumped 30% following the news of the lawsuit.
Chevron (NYSE: CVX) and Tokyo Electric Power, or TECPO, recently came to an agreement regarding Chevron's Wheatstone project. Essentially, TEPCO wants in. The deal that the two companies have agreed on results in a substantial increase in the amount of liquid natural gas that TEPCO will receive from the Wheatstone project. That's not all: TEPCO will also purchase an 8% equity stake in the project. Clearly this is beneficial for TEPCO, but the effects on Chevron stock have yet to be determined. More details are required in analyzing whether or not this is a good development for the stock.
Exxon Mobil (NYSE: XOM) recently announced that it does not intend to continue with exploration activities in Poland. The company had hoped to find significant reserves of shale gas in the area. However, after a round of preliminary testing, it seems that there is simply not enough gas for commercial purposes. This is an unfortunate blow for the oil and gas stock. The company holds six licensing permits for exploration in the company. This means that it will have to carefully reconsider its future in the country given the recent testing results.
Chesapeake Energy (NYSE: CHK) recently brought in a new independent, nonexecutive chairman, Archie W. Dunham. This is a big step in the right direction for the company, which has been plagued with issues surrounding CEO Aubrey McClendon. Mr. McClendon remains the chief executive and president, but no longer has chairmanship at the company. Mr. Dunham was formerly the CEO of ConocoPhillips, where he oversaw the company's successful merger with Phillips Petroleum back in 2002. I believe the addition of Mr. Dunham could certainly turn things around for Chesapeake.
I feel that BP has a long way to go if it wants to recover. Because of the close scrutiny it is under due to the events in the Gulf of Mexico two years ago, the situation here is taken more seriously than it otherwise may have been. Sometimes it feels as though the stock will be unable to recover at all, and this may in fact be the case. Close monitoring of BP's activities, as well as a careful analysis of its position in the current market, is needed if we are to make an informed decision about the direction of the stock, but the signs all point down right now.
jewishitalian31 has no positions in the stocks mentioned above. The Motley Fool owns shares of ExxonMobil and has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2013 $25.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, and long JAN 2014 $30.00 calls on Chesapeake Energy. Motley Fool newsletter services recommend ATP Oil & Gas and Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
