CAM Cameron International Corp.

BP Plc (BP) lost two major rulings in its legal defense to pay billions of dollars for damages related to the Deepwater Horizon rig disaster. But it was protected from some of its future exposure.

As a reminder, on April 20, 2010, offshore driller Transocean Ltd.’s (RIG) ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. Gulf of Mexico (GoM) 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 country’s worst oil spill ever. Subsequently, a moratorium was imposed on offshore drilling at water depths of more than 500 feet in the region, which was lifted on October 12, 2010.

The first ruling passed by a Federal judge on Monday stated that the states of Alabama and Louisiana can chase punitive damages against BP and other companies. According to the judge, such cases have been dealt with before. The judge stated that in this case, a maritime law is applicable and the Oil Pollution Act does not bar claims under it. However, some claims, which were based on various state environmental laws, have been blocked.

Alabama and Louisiana are seeking compensation for harm done to natural resources and property, economic damages such as tax revenue lost due to the spill, clean up expenses and damages to reputation.

The second ruling passed on Tuesday held that BP is not entitled to insurance coverage for the spill under insurance policies totaling $750 million. These policies are held by Transocean, the owner of the Deepwater Horizon rig that BP had leased at the time of the GoM disaster. The British oil major owned the Macondo well that blew out and caused the spill.

Per the drilling contract, BP was accountable for the Macondo well oil release pollution liabilities. Transocean was saved from the spill costs since it was free from pollution liabilities.

However, BP has also sued Halliburton Company (HAL) as well as Cameron International Company (CAM), which were involved in the cement work on the well and building of a blowout preventer, respectively.  While BP has demanded that these two companies share the spill costs, the contractors have opposed to the lawsuits.

BP holds a Zacks# 3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock.

 
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