Dark Clouds Hover Above Anadarko
NEW YORK (TheStreet) -- Smart investors understand that one needs to have an extremely high frustration threshold to invest in commodity-driven industries. In the case of Anadarko Petroleum
While Anadarko's upstream oil and gas business is already a high-risk proposition given the unpredictable nature of exploration and production, the company has also been dealing with a lengthy lawsuit with the creditors of Tronox
Kerr-McGee, which is the former parent company of Tronox, was acquired by Anadarko in 2009 for $19 billion. The acquisition, however, occurred right after Kerr-McGree spun off Tronox. Shortly after Tronox was spun-off, Tronox filed for Chapter 11 bankruptcy protection due to substantial environmental burdens it was unable to repay. These include clean-up costs as well as other penalties.
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To make a long story short, not only has Tronox since settled with the U.S. government, but the company has taken significant steps to regain consumers' trust and rebuild its reputation, including organizing groups such as the environmental-response trusts that are tasked to clean up and repair more than 1,000 facilities suspected of contaminants.
Having emerged out of Chapter 11 protection and looking to recover damages it has incurred, Tronox has created the Anadarko litigation trust. Investors of both companies have desperately wanted to put this issue behind them. To that end, it's encouraging that there have been recent discussions of a settlement worth an estimated $25 billion.