Why Anadarko Petroleum (APC) is Gushing Losses

NEW YORK (TheStreet) -- Anadarko Petroleum (APC) was being pummeled in early Friday trading as investors pored over the details of a detrimental court ruling a day earlier. A U.S. court found the gas explorer and its Kerr-McGee unit to have failed to act responsibly in a spin-off of Tronox  (TROX) in 2005 and that it's liable to pay billions in environmental cleanup costs.

By mid-morning, shares had plummeted 8.5% to $76.54. Year to date, the stock is up 0.47%.

The lawsuit sought to hold the Texas-based business responsible for fraudulent transfers relating to a 2002 internal corporate restructuring of Kerr-McGee. In addition, it was alleged the latter's 2005 spin-off of Tronox, a titanium dioxide business which filed for bankruptcy in 2009, was doomed to fail after being burdened with environmental liabilities.

"Given the significant factual evidence supporting our position, we vehemently disagree with the Judge's Memorandum of Opinion, and we fully expect to pursue every avenue available to us through the appellate process to protect the interests of our stakeholders, once a final judgment including damages has been rendered," said Anadarko CEO Al Walker in a statement.

The ruling could see the company liable to pay damages in the range of $5 billion to more than $14 billion.

In response, J.P. Morgan downgraded the stock to "underweight".

"We expect the stock to trade down and think lingering uncertainty will cause the stock to underperform," analyst Joseph Allman wrote in a report.

Meanwhile, UBS said though the ruling was worse than expected, the company's risk/reward upside calls for a "buy" rating and $110 price target.

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