Anadarko to pay BP $4bn over Deepwater Horizon

Gulf of Mexico tragedy and oil spill claims to be settled 18 months on

Anadarko had been invoiced $6.1 billion to date by BP, but hacve now settled for $4.0 billion.
Anadarko had been invoiced $6.1 billion to date by BP, but hacve now settled for $4.0 billion.

Anadarko Petroleum Corporation has announced an agreement with BP to settle all of BP's current and future claims against Anadarko associated with the Deepwater Horizon event.

Under the terms of the settlement agreement, Anadarko agrees to pay $4.0 billion to BP, and both parties have agreed to mutually release claims against each other. As part of this agreement, BP will release its claims against Anadarko for approximately $6.1 billion of outstanding invoices received to date, as well as to forego reimbursement for any future costs related to the event. In addition, BP will fully indemnify Anadarko for damage claims arising under the Oil Pollution Act, claims for natural resource damages and associated damage-assessment costs, and any claims arising under the relevant Joint Operating Agreement. Anadarko also will transfer its 25-percent interest in Mississippi Canyon block 252 (Macondo) to BP.

"This settlement agreement with BP is the right action for our stakeholders, as it removes significant uncertainty regarding future liabilities and associated risks," Anadarko Chairman and CEO Jim Hackett said. "With this issue resolved, we believe focus will return to the tremendous value embedded in our asset base and the company's operational and exploration success that have been under-valued during the last 18 months. Importantly, BP has committed to use the funds to pay the claims of individuals and entities affected by the Deepwater Horizon event."

According to its public filings, BP has recorded a charge in excess of $40 billion for total estimated costs associated with the event.

To date, BP has invoiced Anadarko an aggregate of $6.1 billion for what BP considers to be Anadarko's 25-percent proportionate share of BP's actual and near-term costs.

“This settlement represents a positive resolution of a significant uncertainty and it resolves the issues among all the leaseholders of the Macondo well,” said Bob Dudley, BP group chief executive. “There is clear progress with parties stepping forward to meet their obligations and help fund the economic and environmental restoration of the Gulf. It’s time for the contractors, including Transocean and Halliburton, to do the same.”

BP previously announced settlements with MOEX, which had a 10 per cent interest in the Macondo well, and Weatherford, which provided drilling equipment. In a statement released today BP said it is working to ensure that other parties, including Halliburton and Transocean, "contribute appropriately".

The BP statement addded: "Multiple official investigations, including those conducted by the Presidential Commission and the Marine Board of Investigation, found that conduct by those parties contributed to the accident. The issuance of regulatory violations last week to BP, Transocean and Halliburton by the US Department of Interior demonstrates that the contractors responsible for well control and cementing, not just the operator, should be held accountable for their conduct." 

Anadarko will record a $4.0 billion liability associated with this settlement in its third-quarter 2011 financials. The company will remit the settlement amount to BP within 45 days and plans to fund the payment with a combination of cash on hand and drawing down funds from its $5.0 billion credit facility.

Anadarko expects to receive in excess of $163 million of net proceeds from its insurance providers and plans to repay borrowings under its credit facility with a portion of the proceeds from a possible monetization of its Brazilian subsidiary. The company expects to open a data room for its Brazilian properties later this year, with anticipated closing of a sale in 2012, subject to the terms achieving the company's desired value thresholds and regulatory approval.

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