Anadarko Petroleum Corp. has agreed to pay BP $4 billion to settle claims arising from last year’s Gulf oil disaster, reversing a hard-line stance that BP should foot the entire bill and removing a cloud that had hovered over the company.
The Woodlands-based company, which owned a 25 percent stake of BP’s blown-out Macondo well, also said it would drop all charges against BP, including one accusing the British oil giant of gross negligence, which held the threat of far greater liabilities for BP.
Anadarko CEO James Hackett called the move the “right action for our stakeholders,” as it eliminates risk of potentially bigger spill-related costs later and allows the company to return its full focus to the business.
BP CEO Bob Dudley said the deal represented “clear progress” in resolving legal disputes with the companies involved and urged remaining parties to “meet their obligations and help fund the economic and environmental restoration of the Gulf.”
Both companies said the agreement is not an admission of liability by any party regarding the accident.
Investors appeared to like the news, boosting Anadarko’s share price $3.87 to $74.44 and lifting BP’s stock price to 425.55 pounds ($670.05), up 9.15 pounds, in London.
BP set aside more than $40 billion to pay for estimated spill costs and claims in the wake of the April 2010 explosion of the Deepwater Horizon drilling rig, which killed 11 workers and launched the nation’s worst oil spill. But from the beginning, it has argued the accident was the result of errors by multiple parties, and that it shouldn’t bear the entire burden for damages.
In May, BP reached a $1 billion settlement with Japan’s Mitsui, which held a 10 percent stake in the well. The following month, it struck a $75 million deal with Weatherford International, which provided drilling services at Macondo.
Around the same time, Anadarko officials said for the first time they would consider settlement talks under the right conditions, after arguing for months that BP acted recklessly and negligently and should be solely responsible for spill costs. The final agreement, announced Monday morning, came after an all-night negotiating session, people familiar with the matter said.
“This is one of those situations where both parties recognized that there was risk going forward,” said Greg Meece, a senior partner with Thompson & Knight in Houston, who specializes in oil and gas industry litigation and is not involved in the case.
BP waives $6.1 billion
Under the settlement, Anadarko will make a single cash payment into a $20 billion trust fund BP established to pay for claims and cleanup costs. The company said it will pay the bill from cash on hand and a $5 billion credit facility. An expected sale of assets in Brazil and a $163 million insurance payment will help offset the cost of the settlement, Anadarko said.
BP, in turn, will waive the $6.1 billion it had sought from Anadarko to cover its share of Gulf cleanup costs and other spill-related claims, as well as indemnify Anadarko for nearly all past and potential future costs, the companies said.
The pact also gives Anadarko the chance to receive a 12.5 percent cut of any future recoveries from other companies involved in the accident or insurance proceeds in an amount up to $1 billion.
The agreement excludes civil, criminal or administrative fines and penalties, punitive damages and certain other potential claims that could still be levied.
Anadarko’s estimated liability from those is likely in the range of $1.1 billion to $1.85 billion, say Barclays Capital analysts.
Last week, the Interior Department‘s Bureau of Safety and Environmental Enforcement began the process of assessing those penalties. It sent notices of alleged violations to BP; Transocean, owner of the BP-leased Deepwater Horizon rig; and Halliburton, whose cement work in the well has come under scrutiny.
Will others settle?
Still unknown is whether the agreement will put additional pressure on the other parties to settle. Those include Transocean, Halliburton and Cameron International, maker of the giant blowout preventer on the sea floor that failed to seal the leaking Macondo well.
A Tranocean spokesman gave no hint an agreement was imminent, instead calling on BP to “step up and make good on its contractual responsibility to defend and indemnify its subcontractors.”
Officials with Halliburton and Cameron declined to comment.