Anadarko to BP: We Won't Pay for Gulf Spill
Anadarko says it won't help BP pay for the worst oil spill in U.S. history.
The Houston company, which owns 25 percent of BP's blown-out well in the Gulf of Mexico, said Friday it has refused to send the $272 million contribution that BP requested in June.
As part owner, Anadarko was on the hook to help pay to corral and clean up the spill. The company believes it should be excused from payments because of BP's reckless handling of the failed deepwater operation.
"Multiple proceedings and independent investigations are under way into BP's actions and decisions on the rig," spokesman John Christiansen said in a statement. "Although we have notified BP that we are withholding reimbursement to BP at this time, we remain committed to working with BP in good faith."
BP says it is disappointed by the announcement and will evaluate its options about what to do next.
"They have failed to live up to their obligations," BP spokesman Mark Salt said in a statement. He said BP was notified of Anadarko's decision on Wednesday.
Another minority owner, Mitsui Oil, also hasn't responded to BP's request to help pay for the spill. Mitsui has until July 12 to pay, Salt said. Calls to Mitsui's office in Houston weren't answered on Friday.
In June, Anadarko CEO Jim Hackett put the two companies on course for what could be a high stakes battle over how much each should pay. Hackett issued a statement blaming BP for "reckless decisions and actions" in its handling of the well, particularly its failure to "react to several critical warning signs" as it drilled below the sea floor.
Legal experts say it could take years to decide if Anadarko and Mitsui should be excused from the payments. Their joint operating agreement puts the decision in the hands of an out-of-court arbitrator.
Analysts have put the cost of the gusher anywhere between $17 billion and $60 billion. However, Goldman Sachs said last month that costs could rise as high as $40,000 a barrel, more than $163 billion if the spill ended today.
As more crude washes ashore, cleanup costs, fines and legal claims could eventually force Anadarko to sell precious assets to stay afloat.
"Both are going to be hurt, but it will be much more severe for Anadarko," Oppenheimer & Co. analyst Fadel Gheit said.
Anadarko shares have plunged about 45 percent, a loss of roughly $14 billion on the open market, since the April 20 blowout off the Louisiana coast. The company also has been named in class action lawsuits from commercial fishermen and other businesses that claim damages from the spill.
To get off the hook, Anadarko would need to show that BP acted with extreme recklessness -- the legal term is "gross negligence"—in its handling of the well.
That will be a hard standard to meet, said Adam Cohen, a lawyer and analyst for the independent Covenant Review.
"An arbitrator is going to have to look at Shell and other operators in the Gulf," Cohen said. "They're going to have to ask: 'As compared to their peers, did they have an utter disregard to what was considered safe and prudent?"'
The judgment will come down to how much BP's practices deviated from the industry standard, he said.
BP has been accused of several missteps in handling the well, including the use of cheaper materials to support the well. BP says it informed Anadarko about all decisions regarding procedures and equipment, though Anadarko argues it's the British company's execution of those decisions that are at fault.
"BP's behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement," Hackett said in his June 18 statement.
So far, BP has paid more than $3 billion for the spill, and its June bill may be only the beginning. Damage claims will continue to pour in from around the Gulf Coast as the oil slick spreads.
Meanwhile, the uncontrolled well continues to pour millions of gallons of crude into the sea. Official estimates put the total amount between 87 million and 171 million gallons, enough to fill the Goodyear blimp Spirit of America nearly 113 times.
If it is eventually required to pay, Anadarko could draw on nearly $4 billion of cash to pay for its share of the bill. Anadarko also owns a number of assets around the world that could go a long way toward paying a cleanup tab. For example, it owns part of an oil field off the coast of Ghana that was valued at $4 billion by Exxon Mobil last year.
"If push comes to shove, Anadarko can raise $4 billion in a heartbeat—at least," Gheit said.