Anadarko Petroleum, a minority stakeholderof the hydrocarbon-spewing Macondo well inthe Gulf of Mexico, sought to further downplayJune 21 its financial exposure to cleanup andliability costs by releasing a copy of its jointoperating agreement with operator BP thatsuggests the operator is at fault for not performingin a workmanlike manner. Accordingto the terms of the joint operating agreementthat Anadarko posted in a securities filing,operator BP was obliged to timely commenceand conduct all activities or operations in agood and workmanlike manner, as would aprudent operator under the same or similarcircumstances.
The operator shall not beliable to the nonoperating parties for lossessustained or liabilities incurred, except as may result from operator s gross negligenceor willful misconduct, with all letters uppercasedand bolded in Anadarko s filing. Unless otherwise provided in this agreement,the operator shall consult with the non-operatingparties and keep them informed of importantmatters, the filing said. The contract,which covers the exploration, appraisal, development,operation, production, treatment,gathering and storage of hydrocarbons at thewell, took effect in October 2009.
Elsewhere,the contract said unless agreed otherwise byall the Parties, the Operator shall be classifiedas the designated applicant for oil spillfinancial responsibility purposes, and eachNon-Operating Party shall promptly executethe appropriate documentation reflecting thatclassification and promptly provide that documentationto the Operator for filing with theUS Department of Interior s Minerals ManagementService. The contract also said that each participating party shall have access toall drilling rigs, production systems, and facilitiesto observe and inspect operations andwells in which it participates (and the pertinentrecords and other data). In an escalating feud that kicked off lateJune 18, Anadarko said last week that BP s behavior and performance likely representgross negligence and willful misconduct andsaid the independent would look to BP topay all legitimate claims. BP quickly fired backthat it strongly disagrees with those allegations,without citing contractual terms. Analystsand market observers are scrambling todecipher or predict ultimate costs to 25%Macondo partner Anadarko. (Japan s MitsuiExploration holds a 10% stake in the well,with BP having 65%.) It could be something between zero and a big number of between$4 billion to $5 billion, RBC Capital Marketsanalyst Scott Hanold said June 21. Citing theterms of the JOA that Anadarko filed, Hanoldsaid The Woodlands, Texas-based company sexposure could have a very limited liability.
But in a worst-case scenario, BP goes bankruptand Mitsui and Anadarko are on the hookfor everything, he said. But assuming BPremains solvent and does not go bankrupt,liability held by Anadarko is likely to behashed out in court, he said.BP sent Anadarko an estimated $300 million-$350 million bill for cleanup costs relatedto the blowout, Oppenheimer analyst FadelGheit said June 21 in a note to investors thatdownplayed takeover speculation aboutAnadarko. Anadarko is distancing itself fromBP and setting grounds for not paying, or atleast reducing, its 25% share of the cleanupcosts and future liabilities, Gheit said.Anadarko is hoping to substantially reduceits financial exposure in connection with theoil spill to less than its 25% share in thewell, Gheit said. We think it is a smartmove...to protect its shareholders and ensureits survival in the face of unknown future liabilities. Gheit, who has a perform onAnadarko stock and an outperform on BP,said takeover speculation at this point maybe premature, especially in light of unknownpotential liabilities. Gheit put estimates fortotal cleanup, compensation and penalties atbetween $20 billion-$140 billion, spreadover 5 and 20 years.
We think (Anadarko)would benefit from reducing its total financialexposure to less than $10 billion, eitherthrough negotiation or legal action against itspartner and well operator BP, Gheit said. AnalystBen Dell of Bernstein Research on June21 said we believed that BP may settle withAnadarko rater than face a prolonged courtbattle in an unfavorable jurisdiction. As aresult, Anadarko s ultimate liability from thecleanup could be materially less than 25% ofthe total, Dell said. Bernstein rates Anadarkostock an outperform. An Anadarkospokesman did not respond to queries June21. A person at a BP media hotline whocalled herself a contractor, not a BP employee, said, I m afraid we won t comment onthose sorts of questions related to any billthat may have been sent to Anadarko. Butshe said other parties beside BP may beresponsible, and we expect those parties tolive up to their obligations...these things arestill to be determined.
The operator shall not beliable to the nonoperating parties for lossessustained or liabilities incurred, except as may result from operator s gross negligenceor willful misconduct, with all letters uppercasedand bolded in Anadarko s filing. Unless otherwise provided in this agreement,the operator shall consult with the non-operatingparties and keep them informed of importantmatters, the filing said. The contract,which covers the exploration, appraisal, development,operation, production, treatment,gathering and storage of hydrocarbons at thewell, took effect in October 2009.
Elsewhere,the contract said unless agreed otherwise byall the Parties, the Operator shall be classifiedas the designated applicant for oil spillfinancial responsibility purposes, and eachNon-Operating Party shall promptly executethe appropriate documentation reflecting thatclassification and promptly provide that documentationto the Operator for filing with theUS Department of Interior s Minerals ManagementService. The contract also said that each participating party shall have access toall drilling rigs, production systems, and facilitiesto observe and inspect operations andwells in which it participates (and the pertinentrecords and other data). In an escalating feud that kicked off lateJune 18, Anadarko said last week that BP s behavior and performance likely representgross negligence and willful misconduct andsaid the independent would look to BP topay all legitimate claims. BP quickly fired backthat it strongly disagrees with those allegations,without citing contractual terms. Analystsand market observers are scrambling todecipher or predict ultimate costs to 25%Macondo partner Anadarko. (Japan s MitsuiExploration holds a 10% stake in the well,with BP having 65%.) It could be something between zero and a big number of between$4 billion to $5 billion, RBC Capital Marketsanalyst Scott Hanold said June 21. Citing theterms of the JOA that Anadarko filed, Hanoldsaid The Woodlands, Texas-based company sexposure could have a very limited liability.
But in a worst-case scenario, BP goes bankruptand Mitsui and Anadarko are on the hookfor everything, he said. But assuming BPremains solvent and does not go bankrupt,liability held by Anadarko is likely to behashed out in court, he said.BP sent Anadarko an estimated $300 million-$350 million bill for cleanup costs relatedto the blowout, Oppenheimer analyst FadelGheit said June 21 in a note to investors thatdownplayed takeover speculation aboutAnadarko. Anadarko is distancing itself fromBP and setting grounds for not paying, or atleast reducing, its 25% share of the cleanupcosts and future liabilities, Gheit said.Anadarko is hoping to substantially reduceits financial exposure in connection with theoil spill to less than its 25% share in thewell, Gheit said. We think it is a smartmove...to protect its shareholders and ensureits survival in the face of unknown future liabilities. Gheit, who has a perform onAnadarko stock and an outperform on BP,said takeover speculation at this point maybe premature, especially in light of unknownpotential liabilities. Gheit put estimates fortotal cleanup, compensation and penalties atbetween $20 billion-$140 billion, spreadover 5 and 20 years.
We think (Anadarko)would benefit from reducing its total financialexposure to less than $10 billion, eitherthrough negotiation or legal action against itspartner and well operator BP, Gheit said. AnalystBen Dell of Bernstein Research on June21 said we believed that BP may settle withAnadarko rater than face a prolonged courtbattle in an unfavorable jurisdiction. As aresult, Anadarko s ultimate liability from thecleanup could be materially less than 25% ofthe total, Dell said. Bernstein rates Anadarkostock an outperform. An Anadarkospokesman did not respond to queries June21. A person at a BP media hotline whocalled herself a contractor, not a BP employee, said, I m afraid we won t comment onthose sorts of questions related to any billthat may have been sent to Anadarko. Butshe said other parties beside BP may beresponsible, and we expect those parties tolive up to their obligations...these things arestill to be determined.
