Explosion and sinking of Deep Water Horizon Rig

The explosion, sinking, and leaking from a Transocean owned and operated oil rig in the Gulf of Mexico will have lasting impact. The Transocean rig, called the Deep Water Horizon, was drilling in a BP GOM (Gulf of Mexico) oil field when it experienced some sort of catastrophic failure during a likely blow-out. At this point it is fairly apparent that at least 11 people lost their life in this tragedy, I don't want that point lost on anyone while I discuss financial implications.

I currently own BP, which is in what appears to be a very strong downward movement. As I have recommended it over and over again in this blog, I feel the need to tell anyone owning this stock for the short-term to sell. I also want to cation long-term holders that there is a large potential for loss on this stock too. Anyone holding Transocean (RIG) should sell now.

Internal to the industry it is well known that Transocean was operating the Horizon rig when the incident occurred, however the company is not a household name and the field is owned by BP. Most people know of the company BP. In the court of public opinion the aftermath of this explosion, a giant oil leak in the GOM, is a BP problem. Indeed BP has jumped to action quickly to try to contain this leak, in fact they acknowledge that they are spending over $6M a day trying to contain the leak.

I am not sure how the legal part of this will play out, and I'm not sure who is legally responsible for this incident. However I do know that both companies will suffer tremendously from this incident. I do not expect that this is the kind of thing either of these two companies will be able to recover from this year. If I still owned RIG (which I do not) I would certainly sell now, I suspect that many lawsuits will be filed against them. As I do own BP, I am still trying to evaluate what this will mean for a long-term investor like me. If I was a short-term investor with BP stock I would sell immediately.

The potential environmental impact of this is hard to fathom, and it hurts me to think about the irrefutable impact this will have. Whether or not you consider yourself to be "green" or not, this impact will be devastating, and should make you stop to think about the impact we are having on this planet. It is a hypocrisy I face every time I invest in this industry.