BP, Cameron Settle Oil Spill Claims - Analyst Blog
December 19 2011 - 5:45AM
Zacks
BP Plc (BP) has
inked an agreement with Cameron International
Corporation (CAM) to settle all mutual claims related to
the Deepwater Horizon accident and spill. Cameron, the designer and
manufacturer of the blowout preventer (BOP) used on the Deepwater
Horizon, has agreed to pay BP $250 million.
The amount – to be paid by January
13 next year – will directly be placed in a $20 billion trust,
which BP had formed for payments of claims related to the oil spill
as well as damages to natural resources. In the meantime, BP agreed
to indemnify Cameron for compensatory claims arising from the
spill, including claims relating to pollution stemming from the
accident or any damage to natural resources.
BP and Cameron have also decided to
withdraw claims against each other in the Multi-District Litigation
pending in New Orleans. However, BP’s indemnity rules out civil,
criminal or administrative fines and penalties, claims for punitive
damages, and certain other claims.
BP considers the settlement to be
in the best interest of both companies. The British oil major also
added that the agreement is not an admission of liability by either
party.
A new report into the causes of the
spill found the design and maintenance of the BOP on the Deepwater
Horizon unsuitable. The report held that the BOP was not properly
designed or tested for the conditions that existed at the time
efforts were made to recapture well control.
BP has already reached settlements
with its partners in the Macondo well, Mitsui and Anadarko
Petroleum Corporation (APC), as well as
Weatherford International Ltd. (WFT), the
manufacturer of the float collar used at the well.
Earlier this week,
Transocean Ltd. (RIG), owner of the giant
Deepwater Horizon platform which was leased by BP, held that it is
not liable to pay any federal fines or penalties for oil spilled
below the surface in the Gulf of Mexico because of an indemnity
provision in its drilling contract with BP.
Countering Transocean’s conduct, BP
stated that the agreement does not cover liabilities that result
from willful misconduct. Transocean on the other hand, is denying
any willful misconduct during the drilling of the Macondo well.
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.
ANADARKO PETROL (APC): Free Stock Analysis Report
BP PLC (BP): Free Stock Analysis Report
CAMERON INTL (CAM): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
WEATHERFORD INT (WFT): Free Stock Analysis Report
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