Independent oil and gas producer Anadarko Petroleum Corporation (APC) finally reached a settlement with BP plc. (BP) for all current and future claims associated with the Deepwater Horizon accident. As per the agreement, Anadarko agreed to pay $4 billion and both companies have thus mutually decided to release all claims against each other.
Anadarko had a 25% interest in the Mississippi Canyon block 252, where the accident took place. Per the public filings, BP has recorded a charge in excess of $40 billion for total estimated costs associated with the event. With Anadarko's decision to pay $4 billion, BP will release its claims against Anadarko for approximately $6.1 billion (25% of $40 billion) of outstanding invoices received to date, plus any future costs related to the event.
Anadarko will take the impact of $4 billion settlement in its third quarter 2011 financials. The company will remit the amount to BP within the next 45 days and will fund the payment from its cash on hand, which was $3.4 billion at the end of the second quarter 2011, and the rest from its $5.0 billion credit facility.
Anadarko expects to receive $163 million of net proceeds from its insurance providers and replenish the borrowings under its credit facility with a portion of the proceeds from a possible monetization of its Brazilian subsidiary.
Anadarko had reported strong results in the second quarter 2011, with its earnings surpassing both the year-ago figure and our expectation. The Zacks Consensus Estimates for third-quarter 2011, fiscal year 2011 and fiscal year 2012 are, respectively, 71 cents per share, $3.33 per share and $3.82 per share.
We believe the settlement has come as a relief for Anadarko as the uncertainty over its liability in the clean-up of the Macondo oil spill has to an extent limited the upside potential of the stock.
Based in The Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs. The company primarily competes with ConocoPhillips (COP) and Exxon Mobil Corp. (XOM).
ANADARKO PETROL (APC): Free Stock Analysis Report
BP PLC (BP): Free Stock Analysis Report
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EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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