London-based BP (NYSE:BP) is nearing the third anniversary of its Macondo Gulf of Mexico well disaster, almost certainly the most horrendous incident in U.S. oil and gas history. Increasingly, the key question surrounding the company involves the extent to which it's recovered from the tragedy and recaptured a role among the desirable additions to energy investment portfolios.
You'll recall that on the night of April 20, 2010, Transocean's (NYSE:RIG) Deepwater Horizon rig exploded, burned, and sank, snuffing out the lives of 11 hands who'd been working aboard the deepwater unit. During the next four months, while the world watched in horror, the damaged well spewed a whopping 4.9 million barrels of crude oil into Gulf waters.
The first of a big chunk
While the oil was still gushing uncontrollably from the well, BP established a $20 billion trust fund for victims of the incident. Thus far, however, the company's payments and commitments have rocketed to about $40 billion.
But that may be far from the ultimate tab. A now six-weeks-long non-jury trial is being conducted in the New Orleans court of U.S. District Judge Carl Barbier to determine the degree of fault attributable to BP and its contractors. That group includes Transocean and Halliburton (NYSE:HAL), which was in charge of cementing the well.
Should Barbier find BP to have been guilty of "gross negligence" in precipitating the disaster, the company could be required to ante up another $18 billion in penalties related to the Clean Water Act. Further, affected Gulf states, led by Louisiana, are awaiting their turn in court to press what they believe could amount to a combined $34 billion for damages and lost tax revenue. The company's assessment of the validity of the latter claims is, however, best indicated by an absence of reserves against charges for missed tax revenues.
Much of the public's exposure to BP has been negative for most of the past decade, beginning with a 2005 refinery explosion at its Texas City, Texas, refinery that killed 15 and injured dozens. Nevertheless, the company continues to make operating strides in a variety of locations. Included was the sale of the snake-bitten Texas refinery last quarter to Marathon Petroleum (NYSE:MPC).
And despite the lingering negatives from Macondo, the company expects to spend about $40 billion during the next decade in the Gulf of Mexico, where it remains a leading producer. Indeed, it operates seven facilities in the Gulf, including the giant Mad Dog and Thunder Horse fields. It also has equity interests in another five plays. It operates the Mardi Gras transportation system of five major oil and gas pipelines that serve fields in the prolific Mississippi Canyon and Southern Green Canyon areas.
Created as the Anglo-Persian Oil Company in 1909, BP continues to be active in the Middle East. It's overseeing the successful remediation of Iraq's massive Rumaila field, is involved in joint ventures with Abu Dhabi National Oil, is exploring in Jordan, and is developing tight gas fields in Oman.
It continues to make strides in West Africa's Angola, where it serves as operator in the productive offshore Block 31. Earlier this quarter, along with its partners, BP announced the start of production from the PSVM development area in the block. Production from the area is anticipated to expand to about 150,000 barrels of oil per day during 2013.
Coming out ahead in Russia
And then there's Russia, where BP has accumulated a decidedly checkered history. In 2003, the company formed a joint venture with four Russian oligarchs that became known as TNK-BP and ranked as the country's third-largest oil company. In 2008, and to some extent ever since, the two sides found themselves at loggerheads. For a while it appeared that, given the tendency for the use of sharp elbows in Russia, BP might be forced to unload its half of the venture at local (read: highway robbery) prices.
Now, however, it seems that a pending sale of both of the partnership interests to giant, state-controlled Rosneft, BP CEO Bob Dudley's company will come out far more than whole. From an $8 billion initial investment, BP has collected $19 billion in dividends along the way.
And when the sale closes imminently, it'll take in another $28 billion or so, made up of about $12 billion in cash and Rosneft shares. The latter will give it about a 20% stake in the Russian company. As such, it'll add about $12 billion to its cash till, while maintaining an interest in the potentially productive Russian Arctic and the Black Sea, where Rosneft and ExxonMobil (NYSE:XOM) are in the early stages of an operating partnership. Indirectly, BP will also gain participation in Exxon projects in the Gulf of Mexico and North America through its new Rosneft interests.
A Keystone connection
Downstream, the company is also spending a fortune on refurbishing refineries in Indiana, Ohio, and Washington state. They're task will be the processing of Canada's heavy crude. Obviously, the demand for that capability will be somewhat dependent on the ultimate fate of TransCanada's (NYSE:TRP) proposed -- and still controversial -- Keystone XL pipeline.
The Foolish bottom line
So with the company still sporting contrasting shades of both black and white, the question becomes one of whether BP is an appropriate place to park your investment shekels. In my opinion -- and admittedly as a shareholder in the company -- the operative word in the question is "park." The company has said that it cannot accurately forecast the magnitude of its lingering Macondo liabilities.
On that basis, and despite its significant positives, I'd counsel Fools to buy BP shares only if they're also willing to add in a longer-than-usual investment time horizon.
Fool contributor David Lee Smith owns shares of BP p.l.c. (ADR) and Transocean. The Motley Fool recommends Halliburton. The Motley Fool owns shares of Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.