Transocean to pay $1.4 billion for role in BP oil spill

WASHINGTON (Reuters) - Offshore rig contractor Transocean Ltd has agreed to pay $1.4 billion to settle U.S. government charges arising from BP Plc's massive oil spill in the Gulf of Mexico in 2010.

The settlement unveiled on Thursday by the Department of Justice includes $1 billion in civil penalties and $400 million in criminal penalties. The company had set aside $1.95 billion in potential losses related to the Macondo well disaster, including $1.5 billion for its anticipated DoJ settlement.

Still to be reached is a Transocean settlement with the Macondo plaintiffs steering committee that represents more than 100,000 individuals and business owners claiming economic and medical damages from the spill.

UBS analyst Angie Sedita said the ultimate cost of Macondo to Transocean could end up being more than $4 billion, including a deal with the plaintiffs that may take "years to resolve." Last year, BP reached an estimated $7.8 billion deal to resolve its liability with the plaintiffs.

Shares of Transocean were up 7 percent at $49.46 in afternoon trading on the New York Stock Exchange, while the cost of insuring Transocean debt fell sharply.

"The bottom line to me is they now can put away the big black cloud that has been hanging over them," said Phil Weiss, an oil analyst at Argus.

Barclays Capital said the DoJ settlement was below its $2.5 billion estimate and believed the resulting clarity would lead to a "significant valuation recalibration" for the company. Barclays noted that among the Macondo contractors, Halliburton remained the only one that had not yet settled. Halliburton shares were up 1.7 percent on Thursday.

A Transocean spokesman was unavailable to discuss remaining Macondo liabilities.

Transocean said the DoJ settlement excluded potential claims related to a separate damages assessment, but it noted that one court had found Transocean was not liable for damages caused by the Macondo well below the surface of the water.

Switzerland-based Transocean owned the Deepwater Horizon rig that was drilling a mile-deep well when a surge of methane gas sparked an explosion on April 20, 2010, which killed 11 men.

The accident led to months of a U.S. deepwater drilling ban and intense scrutiny of the offshore drilling industry, which is now booming again despite lingering public concerns.

Of the $400 million in criminal fines, $150 million will help protect the Gulf of Mexico environment, while another $150 million will fund spill prevention and response efforts there, the DoJ said. Transocean must also implement court-enforceable measures to improve safety and emergency response on U.S. rigs.

"Today's announced settlement will aid the Gulf region's recovery from the Deepwater Horizon oil spill and require Transocean to take important steps that will help guard against such incidents happening in the future," Acting Associate Attorney General Tony West said in a statement.

BP and Transocean had "multiple safety management system deficiencies that contributed to the Macondo incident," and neither had adequate safety rules, according to a July 2012 report from the U.S. Chemical Safety Board.

Transocean and BP disagreed on who was in charge of interpreting what is known as a negative pressure test, which could have alerted workers to the well's instability.

The DoJ said that in agreeing to plead guilty to violating the Clean Water Act, Transocean admitted that members of its crew, acting at BP's direction, were negligent in failing fully to investigate indications that the Macondo well was not secure.

BP in November agreed to a settlement with the U.S. government worth $4.5 billion, including the largest criminal fine ever at $1.256 billion. The London-based oil company also agreed to plead guilty to obstruction of Congress, a felony.

New York-traded shares of BP were up 1.7 percent on Thursday afternoon.

(Reporting by David Ingram in Washington and Anna Driver in Houston; Writing by Braden Reddall; Editing by John Wallace, Howard Goller, David Gregorio and Tim Dobbyn)

Source: http://news.yahoo.com/transocean-pay-1-4-billion-role-bp-spill-170347167--finance.html

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