BP lost 55% shareholder value after the Deepwater Horizon incident
What happened on April 20, 2010?
Deepwater Horizon was a deepwater, offshore oil drilling rig owned by Transocean (RIG) and operated by BP Plc. (BP). On April 20, 2010, while drilling at the Macondo Prospect, there was an explosion on the rig caused by a blowout that killed 11 crew members. On April 22, 2010, Deepwater Horizon sank while the well was still active and caused the largest offshore oil spill in U.S. history.
After the spill, the U.S. Environment Protection Agency (the EPA) barred BP from bidding for new work in the Gulf of Mexico and supplying fuel to the military. The ban was lifted in March 2014.
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Anadarko Petroleum Corporation (APC), Transocean (RIG), and Halliburton (HAL)—the other companies primarily responsible for the incident—have already agreed to pay fines. RIG and HAL are components of the Energy Sector Select SPDR ETF (XLE) and VanEck Vectors Oil Services ETF (OIH).
In January 2013, RIG agreed to pay $1.4 billion for violations of the U.S. Clean Water Act. In September 2014, Halliburton agreed to settle a large percentage of legal claims against it by paying $1.1 billion into a trust.
APC had a 25% stake in the Macondo well in the Gulf of Mexico when the accident happened. In October 2011, Anadarko and BP entered into a settlement agreement. APC sold off the Macondo well in the Gulf of Mexico to BP. It also paid $4.0 billion to BP related to settling all claims related to the Deepwater Horizon incident.
The new ruling may lead to additional penalties that could range from $5 billion to $20 billion, according to initial estimates. Read the following parts of this series to learn more about this.
BP shareholder losses
The fire not only destroyed BP’s physical property and caused casualties, but also destroyed shareholder wealth. From April 19, 2010, to June 25, 2010, BP’s share price came down by 55%—from $59.48 a share to $27 a share.
Subsequently, however, share prices recovered. But they never returned to pre-crisis levels and have hovered around $37 to $52 in the past four years.
Between August 2010 and August 2014, shares have averaged $44 a share. This average is 27% below the peak that shares reached just before the incident.