On the first anniversary of the Deepwater Horizon rig disaster, British giant BP plc (BP) has filed suits in the New Orleans federal court against two of its contractors – Transocean Ltd. (RIG) and Cameron International Corp. (CAM) – seeking billions of dollars in damages and other costs. The London-based group has accused Transocean and Cameron of negligence that led to the biggest environmental disaster in U.S. history.
As a reminder, on April 20, 2010, offshore driller Transocean’s ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. Gulf of Mexico off the coast of Louisiana. The incident killed 11 workers and spewed more than 200 million gallons of crude in what is touted as the worst oil spill in U.S. history. Subsequently, a moratorium was imposed on offshore drilling in the region at water depths of more than 500 feet, which was lifted on October 12, 2010.
The lawsuit filed by BP alleges that Transocean, which owned and operated the Deepwater Horizon, was squarely to blame for the oil spill, as every bit of safety system/device and well control procedure on the rig failed. The Swiss company overlooked critical signs associated with the disaster and failed to take appropriate actions to shut in the Macondo well, alleges BP, and has therefore asked for $ 40 billion in damages.
Separately, BP accused Cameron – the maker of a critical safety device called ‘blowout preventer’ – of designing and building a faulty piece of equipment and negligently maintaining it, which then failed to properly operate when required. As a result, BP seeks to force Cameron to cough up all or part of the damages that could be charged against Europe's second-largest oil company by the federal government.
BP, which took a $ 40.9 billion pre-tax charge in 2010 related to the spill, hopes that the damage claims should help it pay for tens of billions of dollars in charges resulting from the spill, which consist of clean-up and compensation costs.
Incidentally, both Cameron and Transocean have counter-sued BP. According to reports, a federal trial is scheduled for next year to assess the degree of fault and the quantum of liability that lies with the companies.
Cameron and Transocean shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating whereas BP has a Zacks #2 Rank (short-term Buy rating). Longer-term, we are Neutral on all the three stocks.
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