Bloomberg News

Anadarko to Pay BP $4 Billion to Settle Gulf Spill Claims

October 17, 2011

(Updates with closing share price in sixth paragraph.)

Oct. 17 (Bloomberg) -- BP Plc, the operator of the Macondo well in the Gulf of Mexico that was the source of the worst U.S. oil spill last year, said Anadarko Petroleum Corp. will pay $4 billion to settle all claims over the disaster.

Anadarko, which had a 25 percent stake in the well, will no longer pursue allegations of gross negligence against BP. The payment will be made in a single cash sum and will be put in the $20 billion trust being used to repay claims and damages. Under the terms of the deal, Anadarko will transfer its stake in the Macondo well back to BP, the companies said in separate statements today.

The Anadarko settlement will be a boost to BP as the oil company prepares for a February trial in New Orleans to establish liability for the catastrophe. BP would face higher fines if it’s found guilty of gross negligence for the spill, which pumped almost 5 million barrels of crude into the Gulf and forced the company to write off $41 billion. Rig owner Transocean Ltd. and Halliburton Co., which supplied cement for Macondo, are also defendants.

“This is likely to be seen as good news for BP and will increase pressure on Transocean and Halliburton to settle ahead of the multi-district litigation,” Oriel Securities Ltd. said in a note to clients.

BP gained 2.2 percent in London trading to 425.6. Anadarko rose as much as 6 percent in New York.

Anadarko’s Costs

The cost of the settlement will be $5 a share after tax, with the $4 billion payment applied to third-quarter results, The Woodlands, Texas-based Anadarko said today in a filing. Anadarko said it will use cash on hand and draw on $5 billion of bank credit to pay BP within 45 days.

“Though the agreement does not provide indemnification against fines and penalties, punitive damages or certain other potential claims, we do not consider these items to represent a significant financial risk to Anadarko,” Chairman and Chief Executive Officer James T. Hackett said in the filing.

BP will withdraw claims of $6.1 billion against Anadarko, the company said.

Under the terms of the settlement, both parties agreed to drop claims against the other. Anadarko and BP have agreed to work together with respect to indemnified claims and Anadarko has the opportunity for a 12.5 percent participation in recoveries from others or insurance proceeds exceeding $1.5 billion and up to a total cap of $1 billion.

‘Clear Progress’

The Macondo well blowout and the explosion that followed killed 11 workers and set off the worst offshore oil spill in U.S. history. The accident and spill led to hundreds of lawsuits against BP and its partners and contractors, including multiple claims brought by vessel captains, residents and others exposed to chemicals and oil during the cleanup.

“There is clear progress with parties stepping forward to meet their obligations,” BP Chief Executive Officer Bob Dudley said in the statement. “It’s time for the contractors, including Transocean and Halliburton, to do the same.”

BP has now reached a settlement with both partners in the Macondo well. In May, a unit of Mitsui & Co., which had a 10 percent holding in the well, agreed to pay $1.065 billion. Based on that figure analysts had expected a settlement of between $2 billion and $3 billion for Anadarko.

Weatherford International Ltd., which provided equipment for the Macondo well, agreed to pay BP $75 million.

“The good news is that Anadarko has abandoned charges of gross negligence,” Lucy Haskins, an analyst at Barclays Capital in London, said in a phone interview. “We’re getting a drip feed of reports suggesting it was a multi-company event.”

--With assistance from Jim Polson in New York. Editors: Jessica Resnick-Ault, Amanda Jordan

To contact the reporters on this story: Kari Lundgren in London at klundgren2@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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