Cameron International, the maker of the blowout preventer that failed to stop the massive oil spill in the Gulf of Mexico last year, has agreed to pay $250 million to BP, which says it will put the money into the $20 billion escrow fund to settle claims related to the disaster.
Cameron said its insurers would pay $170 million of the $250 million sum. BP would indemnify Cameron from claims related to the Oil Pollution Act and environmental damage, but not against fines, penalties or certain other types of claims.
BP, operator of the Macondo well that exploded on April 20, 2010, killing 11 people and sinking the Deepwater Horizon rig, has now reached agreements with its partners in the lease and two of its contractors.
Analysts said the Cameron deal marked another step in BP’s efforts to move past the accident. “Going to court is not really in the best interest of anyone but the lawyers,” said Fadel Gheit of Oppenheimer & Co. “This is very positive for BP. It confirms what BP has been saying all along: that this was a complex, unfortunate issue that basically had multiple parties involved.”
He warned, however, that BP was “not out of the woods yet.”
BP remains at odds with Halliburton, which provided the cement for the well’s casing and plug, and with Transocean, owner and operator of the $500 million Deepwater Horizon rig. Both contractors have accused BP of missteps leading to the accident, while BP has faulted Halliburton’s cement mixture and Transocean’s rig design and operation.
Moreover, BP is still mired in litigation that could last years, much as Exxon Mobil remained locked in long-running lawsuits after the 1989 Exxon Valdez oil tanker spill off Alaska.
“BP has absolutely moved past the accident to a large extent,” said Pavel Molchanov, oil analyst at financial services company Raymond James. “There will be lingering litigation for years to come. Remember, it took 19 years for the Exxon Valdez litigation to clear up. But when BP reported earnings for the third quarter, management had a much more aggressive tone, and I think that marked a transition to a more normalized strategy.”
BP has paid out $7.5 billion to individuals, companies and governments for claims and damages resulting from the spill. It estimates the final cost of the spill, including government fines, will climb to $42 billion, and it has sold off assets around the world to establish reserves to cover that cost.
So far it has collected $4 billion from Anadarko Petroleum and $1 billion from a unit of Mitsui, both partners in the lease.
The contractors have agreed to pay smaller amounts, Molchanov said, because they are usually indemnified in their contracts. Settling with BP, Molchanov said, removes uncertainty for those companies’ shareholders.
“There’s a benefit from the standpoint of their stocks to draw a line under this and move on,” Molchanov said. “These are just not big sums of money in the grand scheme of things.”
Cameron chief executive Jack Moore said, “this agreement with BP is the right action, as it removes uncertainty facing Cameron in the litigation associated with the Deepwater Horizon event.”
A single Cameron blowout preventer can cost around $30 million, industry sources said.
“Cameron is the fourth company to settle with BP and contribute to economic and environmental restoration efforts in the Gulf,” BP chief executive Bob Dudley said in a statement. “Unfortunately, other companies persist in refusing to accept responsibility for their roles in the accident and for contributing to restoration efforts.”
Oppenheimer’s Gheit said BP wants to settle remaining claims as soon as possible: “BP has made it very clear that they have no interest in litigating this forever, unlike Exxon, which [in the Valdez incident] said, I’ll see you in court. BP has said it is willing to take its share of the blame but the sooner we settle the better off we’ll be. Its approach is completely the opposite of Exxon’s.”