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CHAPTER 4: The Energy Sector > Stock Selection Case Studies

Stock Selection Case Studies


FIGURE 4.1 Case Study No. 3: Transocean, July 2010

Source: Charts provided by Commodity Systems, Inc. (CSI) 2012.

The 2010 Gulf disaster that killed 11 workers and spilled millions of gallons of oil into the Gulf of Mexico did not squeeze just British Petroleum's stock but the stock of any oil firm that had ties to the disaster. This included offshore driller Transocean, which owned and operated the Deepwater Horizon rig (which BP had leased). The Deepwater Horizon was insured for $560 million—already paid to Transocean—but investors feared the company would be held liable for billions more in clean-up costs and restitution. The company's stock had taken a remarkable beating since the Deepwater Horizon explosion. Shares of Transocean (NYSE: RIG), which owned and operated the rig, showed little change for the first few days following the explosion, but as the scope of the disaster became clear and investors began to suspect possible errors by the company, the potential financial responsibility for the explosion took its toll. The shares of Transocean had fallen by more than 50% from $92.03 on April 20 to the mid $40s.


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