Trader Talk

Oil, Banks and Coal: Reputational Risk Rampant


Spills, investigations, and reputational risk: Several companies in 3 different areas (energy, financials and coal) are experiencing problems Friday.

1) the fallout from the Gulf Oil spill. We have NO IDEA what the ultimate cleanup costs will be; I have seen numbers for cleanup costs as low as $500-$700 million (BP says it is costing $6 million per day), but these seem unrealistic. Morgan Stanley said that actual costs could be $20 million a day and take 6 months for a total cleanup cost of $3.5 billion.

Bear in mind, the cost for the cleanup of the Exxon Valdez spill was $2.1 billion (with a B).

What is clear is what has happened to the stocks of companies involved:

Energy stocks this week

BP down 13 percent

Transocean down 21 percent

Cameron down 21 percent

Halliburton down 14 percent

Anadarko down 13 percent (co-leased the rig)

The total market cap loss from these 5 companies alone has been about $46 billion this week.

2) Big financials are all down on reports of a criminal probe into Goldman Sachs; S&P Equity Research has cut them to a Sell.

They too have had a tough week:

Big financials this week

Citigroup down 7.5 percent

Goldman Sachs down 6.5 percent

Morgan Stanley down 4.3 percent

JPMorgan down 4.1 percent

BofA down 2.3 percent

3) Massey Energy (MEE) down nearly 7 percent on report that there is a federal criminal investigation regarding mine explosion in West Virginia.

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