Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BP plc (ADR) (BP), Transocean LTD (RIG): Does the Gulf of Mexico Oil Spill Still Haunt these Stocks?

Page 1 of 2

The tragic 2010 oil spill in the Gulf of Mexico is now more than three years in the past. However, lingering effects still exist and are serving as anchors on the performance of the companies involved in the incident.

That’s why it’s so important to put BP plc (ADR) (NYSE:BP) and Transocean LTD (NYSE:RIG) under the spotlight, to determine whether there’s more pain in store for investors.

BP plc (ADR) (NYSE:BP)

A difficult three years
To say that BP plc (ADR) (NYSE:BP) and Transocean have paid dearly for the mistakes made surrounding the 2010 Gulf spill would be an understatement.

In particular, BP plc (ADR) (NYSE:BP) continues to set aside huge sums of money to cover continuing claims, and is now trying to claw back some of what it has paid. The company objects to a great deal of the claims coming in, with Chief Executive Officer Robert Dudley stating his intent to aggressively fight what he termed ‘false and fictitious claims’.

Indeed, there’s reason for BP plc (ADR) (NYSE:BP) to worry. Under a 2012 settlement to compensate businesses that incurred damage from the spill, BP originally estimated that the cost would be $7.8 billion.  Then, after releasing poor second-quarter results, which saw adjusted profit fall 25% year over year, BP advised investors that the settlement would cost closer to $9.6 billion, and that the final total would be even higher.

All told, BP plc (ADR) (NYSE:BP) has shelled out $42.4 billion, as of the end of its second quarter, due to the Gulf spill. And, more damage is in store, since BP still faces the prospect of forking over billions more once its civil trial has concluded.

Transocean back in action
Meanwhile, the situation is drastically different for Transocean LTD (NYSE:RIG), the owner of the rig that exploded. Transocean pleaded guilty to violating the Clean Water Act and was forced to pay $400 million, in addition to other penalties, earlier this year.

However, Transocean LTD (NYSE:RIG) has more than enough financial ability to recover, as its underlying business has gotten back on track. Revenue is up 3.5% over the first half of the year, and the company booked more than $1 billion in operating profit over the first six months alone.

Furthermore, the company has taken advantage of the global uptick in offshore drilling, and is well-positioned going forward. Transocean LTD (NYSE:RIG) has an immense $27.3 billion contract order backlog, and is in the process of expanding its fleet to meet the increase in demand for deep-water drilling. Since July 17 alone, Transocean has secured $2.5 billion of total value of new contracts.

At the same time, the stock price has languished, unable to meaningfully breach $50 per share since the spill. From a valuation perspective, Transocean LTD (NYSE:RIG) now trades for 11 times its 2012 adjusted EPS.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!