Oil major Chevron (NYSE:CVX) may face new penalties because of the offshore spill off the coast of Brazil in November last year.  The spill that occurred near Chevron’s Frade fields resulted in the leakage of around 3,000 barrels of oil and prompted Brazilian authorities to charge the company with civil and criminal liabilities. Chevron stopped production at the Frade fields because of another leak that was discovered near its facilities earlier this year. The company has already been fined about $28 million for the incident and prosecutors are pursing a $10.6 billion civil lawsuit against Chevron for the incident.
We have a $109 price estimate for Chevron, which is at a 15% premium to its current market price.
Brazilian authorities confirmed that Chevron would face additional penalties for its role in the November spill.  Investigations into the accident are still being carried out, and regulators are currently allowing Chevron to respond to some of the charges raised. A spokesperson from Brazil’s National Petroleum Agency (NPA) said that the final penalty amount will be determined by July. Chevron has maintained that its response to the oil leak was according to industry practices and that it dealt ‘transparently’ with regulatory agencies on the issue. The stoppage of production at the Frade is expected to lower Chevron’s global production by about 30,000 barrels / day in the present quarter.
Brazilian prosecutors have taken a tough stand against Chevron over the incident. The company is currently facing a $10.6 billion claim for damages, and 17 Chevron employees and a drilling company have been included in the lawsuit. (See: Chevron Still Good for $109 Despite Brazil Ban for Leaks & Poor Handling) Analysts have said that the stringent response could deter Chevron and other explorers from investing in Brazil’s deepwater resources.
- Brazil Spill Gets More Complicated for Chevron (trefis.com)
- Chevron May Reconsider Brazil Exploration After Frade Headache (trefis.com)