BP: Continuing the Blame Game? - Analyst Blog
April 21 2011 - 12:26PM
Zacks
On the first anniversary of the
Deepwater Horizon rig disaster, British giant BP plc
(BP) has filed suits in the New Orleans
federal court against two of its contractors – Transocean
Ltd. (RIG) and Cameron
International Corp. (CAM) – seeking
billions of dollars in damages and other costs. The London-based
group has accused Transocean and Cameron of negligence that led to
the biggest environmental disaster in U.S. history.
As a reminder, on April 20, 2010,
offshore driller Transocean’s ultra-deepwater Horizon drilling
platform, contracted to BP, sank following an explosion while
operating in the U.S. Gulf of Mexico off the coast of Louisiana.
The incident killed 11 workers and spewed more than 200 million
gallons of crude in what is touted as the worst oil spill in U.S.
history. Subsequently, a moratorium was imposed on offshore
drilling in the region at water depths of more than 500 feet, which
was lifted on October 12, 2010.
The lawsuit filed by BP alleges
that Transocean, which owned and operated the Deepwater Horizon,
was squarely to blame for the oil spill, as every bit of safety
system/device and well control procedure on the rig failed. The
Swiss company overlooked critical signs associated with the
disaster and failed to take appropriate actions to shut in the
Macondo well, alleges BP, and has therefore asked for $40 billion
in damages.
Separately, BP accused Cameron –
the maker of a critical safety device called ‘blowout preventer’ –
of designing and building a faulty piece of equipment and
negligently maintaining it, which then failed to properly operate
when required. As a result, BP seeks to force Cameron to cough up
all or part of the damages that could be charged against Europe's
second-largest oil company by the federal government.
BP, which took a $40.9 billion
pre-tax charge in 2010 related to the spill, hopes that the damage
claims should help it pay for tens of billions of dollars in
charges resulting from the spill, which consist of clean-up and
compensation costs.
Incidentally, both Cameron and
Transocean have counter-sued BP. According to reports, a federal
trial is scheduled for next year to assess the degree of fault and
the quantum of liability that lies with the companies.
Cameron and Transocean shares
currently retain a Zacks #3 Rank, which translates into a
short-term 'Hold' rating whereas BP has a Zacks #2 Rank (short-term
Buy rating). Longer-term, we are Neutral on all the three
stocks.
BP PLC (BP): Free Stock Analysis Report
CAMERON INTL (CAM): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
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