In the classic Grateful Dead song ''Casey Jones,'' the chorus goes ''trouble ahead, trouble behind.'' Of course those lyrics apply to something else altogether, but they are relevant to the world's most notorious oil company: BP. A view through rose-colored glasses may help an investor see a not-so-bad picture of the British oil giant. That is understandable as the news flow involving BP has been more positive than negative over the past few weeks. At the very least it has been less bad than what was seen in May and most of June.
BP's shares are up almost 50% since touching a low of $26.75 in late June. The company is finding eager buyers all over the world for non-essential assets. Apache (APA) eagerly snapped about $7 billion in BP assets. Several Indian companies are clamoring for BP's stake in a Vietnam gas field and two companies are doling out almost $2 billion to acquire BP's Colombian assets. CEO Tony Hayward will depart on October, excommunicated to Russia. Not to mention, BP capped the Macondo well a couple of weeks ago and appears to be making progress toward permanently killing the well.
All of that falls into the trouble behind category. Trouble ahead includes a topic addressed by Jim on Sunday, that being the company's use of a highly toxic chemical dispersant in the Gulf to breakup the oil spewing from the Macondo well. Use of this dispersant has drawn the ire of the EPA. Getting on the bad side of just one of the alphabet soup agencies based in Washington is more often than not bad news for big companies. Tangle with multiple D.C.-based acronym agencies at the same time and any company could have real problems on their hands.
Yet that might be the road BP (BP) is going to traverse with news that the SEC and the Justice Department (DOJ) are ''conducting informal inquiries into securities matters.'' Translation: BP executives may be under investigation for trading (most likely selling) the company's shares based on insider information they had on the Gulf oil spill. DOJ was already looking into BP for possible criminal and civil violations and an insider trading scandal would only make matters worse for BP.
Already under scrutiny for possible violations of laws ranging from the Clean Water Act and the Oil Pollution Act of 1990 to the obscure Migratory Bird Act, insider trading allegations become icing on the cake for a company now known more for its public relations gaffes than its prowess in finding and extracting energy resources.
If the rumors prove true that there was in fact insider trading taking place at the top of BP while other investors suffered as the stock cascaded to the mid-20s from the low-60s, it is doubtful that government regulators will use a slap on the wrist approach to reprimand the company.
The energy industry already has a black eye when it comes to executives dumping their shares while a stock was on the cusp of implosion thanks to a little company called Enron. If BP executives did not acknowledge that fact, that is a testament to their own greed. Tussling with DOJ and the SEC in a post-Enron, post-Madoff world, well that just means there is trouble ahead.