Terms call for $1.07 billion to settle claims over Deepwater tragedy
Shares of oil giant BP PLC rallied nearly 4% Friday after MOEX USA Corp., one of the co-owners of the Macondo oil well in the Gulf of Mexico, agreed to hand over $1.07 billion to settle claims from the Deepwater Horizon disaster.
BP said it will receive the payment from MOEX, which owned a 10% stake in the well through a subsidiary.
Japan’s Mitsui & Co. the majority holder in an entity that owns MOEX, confirmed the settlement in a separate announcement. Anadarko Petroleum Corp. held a 25% stake in the Macondo well.
The agreement makes MOEX the first of BP’s partners to agree to contribute to the cost of the disaster in the Gulf of Mexico.
“MOEX ... has joined BP in recognizing and acknowledging the findings by the Presidential Commission that the accident was the result of a number of separate risk factors, oversights and outright mistakes by multiple parties and a number of causes,” BP said.
BP’s shares rallied 3.7% in London following the announcement. See more on Friday trading in London‘s FTSE 100.
Jonathan Jackson, head of equities at Killik & Co., said he was “slightly disappointed” by the size of the settlement when compared to BP’s latest estimate that the spill will cost $41.3 billion. Overall, however, the agreement is positive news, he added.
“It is the first time that a company involved in the well has joined BP in helping to meet the cost of the accident and it appears to reinforce the likelihood that BP will not be found grossly negligent, an outcome that would bring a much larger liability under the Clean Water Act,” Jackson said.
The payment will be applied to the $20 billion trust that the oil company established last year to pay claims resulting from the deadly Gulf of Mexico explosion and spill.
“MOEX Offshore has also recognized and acknowledged the conclusions of the United States Coast Guard that, among other things, the safety management systems of both Transocean Ltd.and its Deepwater Horizon rig had significant deficiencies that rendered them ineffective in preventing the accident,” BP said.
Chief Executive Bob Dudley called on other partners in the Macondo well to also contribute to the massive cost of cleaning up and compensating victims.
“If this settlement is swiftly followed by an agreement with Anadarko, BP should be able to begin to put the whole Macondo saga behind it, especially if this is followed by an agreement with the U.S. Department of Justice,” said Jefferies International analyst Iain Reid.
Contractors involved in the Macondo project included Transocean, which was the operator of the Deepwater Horizon drilling rig, as well as Halliburton Co. and Cameron International Corp.
BP said it’s agreed to indemnify MOEX for compensation claims arising from the disaster, but not from civil or criminal fines or penalties or from claims for punitive damages.
It added that the agreement isn’t an admission of liability by either party.
Simon Kennedy is the City correspondent for MarketWatch in London.