Why Anadarko Petroleum Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AnadarkoPetroleum  dropped as much as 12% in early trading after a legal ruling went against the company.

So what: A U.S. bankruptcy judge said Anadarko could be liable for $5 billion or more in environmental and legal liabilities related to its acquisition of Kerr-McGee in 2006. The real culprit is Tronox, which was spun off from Kerr-McGee in 2005 in an effort to rid the company of liabilities before being acquired.  

Now what: Estimates for Anadarko's liabilities from both the company and analysts had been far lower than the $5.2 billion to $14.2 billion in damages estimated by Judge Allan L. Gropper. That's why there's such a strong reaction on the market today. As with most legal proceedings, this could drag out for years before a final ruling but it's apparent that Anadarko will have a major liability on its hands, which is a big deal even for a company of its size.

3 lower risk energy plays for you
Anadarko Petroleum has been one of the companies taking advantage of an evolving energy market but with these liabilities there are lower risks out there. The Motley Fool is offering a comprehensive look at three energy companies we think will adapt well to the future of energy and you can find out what they are in the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article Why Anadarko Petroleum Shares Plunged originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story