Yesterday, Chevron officially admitted that it was responsible for a massive spill that loosed as many as 3,700 barrels of oil a day into the Atlantic Ocean. Though the rupture that caused the release has since been plugged, oil is continuing to leak into the sea at a rate of 420-4,200 barrels a day. That's Chevron's estimate, anyway. The Brazilian government says that thus far, at least 110,000 gallons of oil have been released into the deep blue.
So, what's the response from Forbes? Buy Chevron!Bearing advice that is sure to win Wall Street countless new fans, Nigam Arora, a stock trader and investment officer, penned an article for Forbes entitled "Why I'm Buying Chevron And Transocean Because Of The Brazilian Spill." The rationale goes like this: After news of the spill spread, investors started dumping Chevron and Transocean (who manufactured the rig at the disaster site, as well as the failed Deepwater Horizon rig) stock. But they're suckers, you see. Arora explains that "Investors in Switzerland-based Transocean were creamed again as shares dropped alongside Chevron’s. It appeared a replay of Deepwater Horizon spill ... I stepped up and bought both Chevron and Transocean and sent ‘buy’ signals to subscribers to my ZYX buy alert. All six of my screens were flashing ‘buy’ for both Chevron and Transocean."
Using figures provided by Chevron, Arora does the math: "In the worst case, 2340 barrels of oil were spilled causing a market capitalization loss of about $17 billion. This translates to $7,359,307 per barrel spilled based on the worst case scenario of the spill, let us say $6 million per barrel for those who would miss the point and engage in nit-picking." In other words, Chevron is unlikely to be nearly as hard hit financially as BP was, and will quickly recover its footing in the markets.
"The good news is that headlines in major media outlets are still very negative. Here is an example from a major financial publication – “Chevron Caused Brazil Oil Spill.” The headlines are to be considered good because trigger happy institutions may still be selling Chevron on the bad headlines presenting an opportunity for astute investors to scoop a bargain."Yes, the "good news" is that some investors will react morally to an environmental disaster and withdraw financial support for an oil company that caused a major spill and first lied about it before begrudgingly admitting fault. Others still will assume that Chevron will have to pay the actual cleanup costs that such a spill is sure to require (independent estimates put the size of the spill much larger), before inevitably ducking out of that responsibility. What losers! Can you even imagine living in a world where markets punish reckless and dangerous corporate behavior? What a hippie-dippy fantasy world that would be!
In a humorous aside, observe how the financial analyst writes "Now we know the reality:" and directly proceeds to quote a Chevron press release. Seriously.
And Wall Street traders like this guy wonder why everyone has such a low opinion of them.