Oil prices are creeping up, which is excellent news for oil companies like BP (BP -0.31%). And the results of that are carrying through to the bottom line: When it reported third-quarter results this week, BP delivered its highest profits in five years. So why is its stock price about the same as it was a year ago?

As MarketFoolery host Chris Hill and senior analyst Taylor Muckerman explain in this segment of the podcast, BP has more than a few company-specific issues dragging it down. But it also has some solid tailwinds that suggest its shares would be a good investment today. They also dig into last week's news that the state of New York was suing ExxonMobil (XOM -0.88%), asserting that it had defrauded shareholders by downplaying the risks of climate change.

A full transcript follows the video.

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This video was recorded on Oct. 30, 2018.

Chris Hill: BP's third quarter profits were the highest in five years, although you wouldn't necessarily know it from what's happening with the stock. The stock is basically where it was a year ago. It's up ever so slightly today. Tell me what's going on with BP.

Taylor Muckerman: Yeah, you see oil prices creep back up toward $80 a barrel, you would think that some of these companies with the greatest exposure to oil and natural gas would be keeping pace. But BP, not so much. I have said several times on Industry Focus over the last couple of years that, of the majors, this is the one that I would likely jump aboard if I was going to invest in an oil major. I think internally, it's been justified, but the share price is still languishing. They continue to divest some businesses because they still owe money on the Macondo disaster. I think they're going to end up paying about $3 billion this year. We're talking five, six years later. And they're going to be selling off more U.S. onshore assets to pay for that. But then, they're getting heavier into the shale game. They closed their BHP Billiton purchase for their shale assets. They expect to be able to pay all cash for that, if oil prices remain where they are.

Internally, they judge their projects by $60-65 a barrel. Right now, we're well above that. It seems $60-65 is that that Goldilocks moment, right in the middle of where you might expect it to be. And, a lot of projects coming online. I think they're in a good place right now, it's just still an oil company, which investors haven't really jumped back on with.

Hill: You say that, of the behemoths out there, this is the one you find the most interesting from an investor's standpoint. Why BP and not, say, an ExxonMobil?

Muckerman: BP had been forced to streamline. Whereas Exxon just is what it is. It hasn't been forced to check itself. They've made several big purchases over the years. Some of them have played out, some of them haven't. You have to wait five to 10 years to see if some of these actually do. With BP, they trimmed a lot of the fat to pay off some of these burdens that they've had from the Gulf Oil disaster. Now, I just like where they're at, in terms of upstream assets, more oil-focused. With the projects coming online in the Gulf of Mexico and in Australia recently, they don't have the capital expenditures that, say, some Exxon or Chevron have looking forward.

Hill: Something happened last week when we were out in Denver for our member event. When I saw this headline, I immediately thought, "I have to get Taylor in the studio to talk about this." This is the Attorney General from the state of New York filing a lawsuit against ExxonMobil, alleging that the company defrauded shareholders by downplaying the expected risk of climate change. When that news broke last week, Exxon's stock, which had been trading up during the day, immediately started to head south. Not in some dramatic way, but it was a pretty noticeable change. I'm curious what you think of this lawsuit. In some ways, this is completely expected. The Attorney General's office in the state of New York has been looking into this matter going back three years. So, filing a lawsuit was going to come at some point. If you're an ExxonMobil shareholder, how worried are you?

Muckerman: I think it's going to be a headache.

Hill: I was just going to say, it doesn't go in the plus column.

Muckerman: No, it's definitely not something to brush aside. It's going to be a distraction at the very least for management. It all stems from, in 2015, it came to light that they've been saying things that differed from their internal studies on climate change, saying externally that it's not really that big of a deal; internally, they discovered that, "Hey, this really could be a big thing moving forward, and as an oil and gas company, we need to at least address it internally." So, saying one thing and knowing another is what started the investigation. That's still what's coming out with this new case, but it's slightly different. Here, we're talking about potential securities fraud, misleading investors, not just the general public. I think that's scaring folks a little bit. I'm no legal expert, but I guess folks are saying, the Martin Act exposes ExxonMobil to some bigger penalties or a broader array of penalties.

Basically, they've used different carbon tax pricing in the public sphere vs. what they used internally to justify moving forward with projects. But when you look at it, they used a much higher carbon tax price when they had spoken to the public than they did internally, so they made it seem more damaging than they actually thought it would be. A lot of folks are saying, "If they had just not even undergone this exercise, which could have been more to the detriment of investors, they would be totally fine, because there wouldn't be that discrepancy in what they've said and what they've internally used." So, if they had been less cautious, they'd be fine, and investors could have been punished even more, unknowingly punished.

I think headache at the very least. Potentially a few hundred million dollars in fines. But it's not going to come up right away. There's going to be complicated math here, and definitely taking it to the courts.

Hill: It always makes me smile, whenever we talk about these behemoth companies and say, "Eh, they'll probably pay $100 million dollars in fines."

Muckerman: And then that's it.

Hill: They can.

Muckerman: They kind of tried to do the right thing, they just weren't consistent publicly and internally. That's what's tripping them up again.

Hill: It's always the cover up, people!

Muckerman: Yeah, it is. It's always the cover up!

Hill: It's always the cover up! Whether it's your personal life or politics or investing, it's always the cover up that gets you.