LONDON Anadarko Petroleum Corp will pay BP Plc $4 billion toward clean-up and victim compensation for the Gulf of Mexico oil spill. The amount is less than BP might have won in court, but it softens the blow of overall spill-related costs to the British group.
As part of the settlement announced on Monday, Anadarko also said it will no longer pursue allegations of gross negligence against BP. It is unclear what impact this development will have on the remainder of the morass of litigation pending in federal court in New Orleans, legal experts said.
Investors greeted the deal as good news for both companies. BP shares rose 2.2 percent in London and Anadarko shares closed 5.5 percent higher at $74.44 on the New York Stock Exchange.
"We maintain our view that the ultimate cost to BP could fall ... substantially below the cost inferred by the share price fall since the accident," said Richard Griffith, an oil analyst at Evolution Securities.
Anadarko, based in Woodlands, Texas, was a 25 percent partner in the doomed Macondo well. It sued BP in April, claiming that gross negligence by BP caused the blowout and saying that BP is responsible for economic losses from the incident. BP, in turn, invoiced Anadarko $6.1 billion for spill-related costs it calculated Anadarko owed.
The settlement announced on Monday is "favorable for both companies," BP Chief Executive Bob Dudley said.
Without a deal, Anadarko could have been on the hook for 25 percent of the cost of cleanup, compensating those affected, and any government fines. BP has said the total bill for the oil spill, including fines, will be $42 billion. This suggests Anadarko could have faced a total bill well above the $4 billion it agreed to pay.
It could only avoid this responsibility by proving in court that BP had been grossly negligent -- something that could have added around $18 billion to the total amount of fines BP faced. Fines for leaking oil into U.S. waters are assessed at $1,100 per barrel, or $4,300 if gross negligence is proven. The government has said the Macondo well leaked almost 5 million barrels into the sea.
Anadarko would still be liable for its share of any fines payable to the U.S. government, according to the deal.
Anadarko's $4 billion payment will be made in cash and paid into the victims' compensation fund BP established last year, Anadarko spokesman John Christiansen said.
On October 12, the U.S. offshore drilling regulator -- the Bureau of Ocean Energy Management, Regulation and Enforcement -- formally issued violation notices against BP, Transocean and Halliburton for their roles in the oil spill. BP received most of the 15 citations, ranging from failure to protect health and property to failing to keep the well under control. A report the previous month found BP solely responsible for 21 of 35 causes of the disaster.
BP has sued Transocean, the owner and operator of the Deepwater Horizon rig, Halliburton Co, which supplied cement to cap the well, and Cameron International Corp, which designed the blowout preventer, a device that was supposed to stop the surge of oil, to share the cost of the spill and cleanup.
These lawsuits are among hundreds of claims set to go to trial before a federal judge in New Orleans in February.
It is unclear what impact the Anadarko settlement could have on these disputes, legal experts said. "Perhaps (the deal) creates some momentum toward other settlements because it suggests BP is willing to resolve claims," said Howard Erichson, an expert in complex litigation and a professor of law at Fordham University. "But I'm not sure it gives Transocean or Halliburton any particular reason to revise whatever calculations they have made."
A Halliburton spokeswoman did not respond to a request for comment.
Transocean spokesman Lou Colasuonno said: "It is time for BP to step up and make good on its contractual responsibility to defend and indemnify its subcontractors."
If BP recoups cash from Transocean or Halliburton, it will pay a portion of this -- up to $1 billion -- to Anadarko under the terms of the deal announced on Monday.
In May, BP agreed to accept $1.1 billion from a third partner in Macondo, Mitsui & Co, to cover its 10 percent share of cleanup costs. The following month, Weatherford International Ltd, which provided equipment for the Macondo well, agreed to pay BP $75 million.
The case is In re: Oil Spill by the Oil Rig "Deepwater Horizon", U.S. District Court, Eastern District of Louisiana, No. 2:10-md-02179.
(Reporting by Tom Bergin and Moira Herbst; Editing by Andrew Callus, Tim Dobbyn and Matthew Lewis)