Anadarko May Face Fines From Federal Agencies Over Gulf of Mexico Spill

Anadarko Corp. (NYSE:APC) may face civil liabilities over the Gulf of Mexico spills if it is determined to be an operator of the Macondo well facility. ^[1] According to a recent court ruling, the company may face liabilities for violations of the Clean Water Act under which it could be fined as much as $1,100 for every barrel of oil that leaked because of the incident. Anadarko owned a 25% stake in the Macondo well that was operated by oil major BP (NYSE:BP). The liabilities have been termed as ‘joined and several’, which means that each company could be held responsible for the whole amount. ^[2]

We have a $90.30 price estimate for Anadarko, which is at a slight premium to its current market price.

Click here for our full analysis of Anadarko Corp.

Potential Liability

Judge Barbier, who is overseeing a major portion of the court proceedings related to the April 2010 spill ruled that since BP and Anadarko were directly involved in the ‘enterprise’ that caused the spill, they could both face claims related to the Clean Water Act. ^[2]

The Act allows for government agencies to collect up to $1,100 /barrel in fines for oil leaks and up to $4,300 /barrel if the parties are responsible for willful misconduct or gross negligence. BP has estimated that its liabilities under the act could be around $3.5 billion, maintaining that the spill resulted in the leakage of 3.2 million barrels of oil. Government agencies on the other hand estimate that around 4.1 million barrels were spilled in the incident. ^[1]

Anadarko had earlier reached an agreement with BP, paying up $4 billion to the oil major in return for indemnification from a number of spill costs. ^[2] However, the deal did not cover fines imposed by federal agencies. Anadarko earlier argued that it was not liable for such penalties because the oil discharge had started at the top of the rig, which was owned by Transocean. ^[1] Transocean had retorted by saying that the discharge was located below the ocean surface. The judge upheld the rig operator’s view that the subsurface discharge was not a part of its vessel. A penalty of around $1 billion could result in a 2-3% downside to our price estimate for the company.

Understand how a company’s products impact its stock price on Trefis.

1. BP Anadarko Petroleum Liable for Pollution Law Violations Judge Rules, Bloomberg [↩] [↩] [↩]
2. UPDATE 2-BP, Anadarko liable for U.S. spill damages, Reuters [↩] [↩] [↩]