Cameron Pays for Blowout; BP Legal Blows Continue (Update 1)


(Updated for comment on Cameron share rally)

NEW YORK ( TheStreet) -- And then there were three, three parties left in a major legal battle over the Gulf of Mexico Macondo oil spill.

The maker of the oil spill "fail-safe" blowout preventer that failed to save BP's ( BP) Macondo well or the lives of the 11 Transocean ( RIG) workers killed in the Deepwater Horizon disaster in April 2010, has agreed to pay $250 million to BP to be indemnified against claims made by BP related to oil spill liability.

Cameron International ( CAM) is paying $250 million into BP's $20 billion oil spill fund, but as spats between all the companies in the BP oil spill go, this resolution is a minor one, though it was a market mover for Cameron on Friday.

Cameron shares were up by 6% on heavy trading. Darren Gacicia, analyst at Vertical Research, said even though Cameron was never considered to have major legal liability in the BP oil spill, there are several reasons for the pop on the news: insurance coverage will cover at least $170 million of the $250 million settlement; the agreement alleviates any concern about unquantifiable damages from the spill, and there was an investor base that wouldn't touch Cameron shares because of the Macondo overhang. Also, with 29 buy recommendations out of a total of 34 analysts in coverage of Cameron, and a consensus price target of $64 on Cameron shares, a spike of $2.34 over Thursday's closing price to $47.10 on Friday isn't hard to fathom, with the unquantifiable, if limited risk, from the BP oil spill finally out of the way.

"Though this agreement does not provide indemnification against fines and penalties, punitive damages or certain other potential non-compensatory claims, we do not consider these items to represent a significant risk to Cameron," Jack Moore, Cameron CEO, said in a statement.

The real legal blows for BP still continue, though, and all it takes to know that is this quote from BP CEO Robert Dudley in announcing the Cameron settlement: "Cameron is the fourth company to settle with BP and contribute to economic and environmental restoration efforts in the Gulf. Unfortunately, other companies persist in refusing to accept responsibility for their roles in the accident and for contributing to restoration efforts."

Those companies would be rig operator Transocean and deep-sea engineer Halliburton ( HAL), and those are the big legal fish to fry as far as BP is concerned in getting some real help in amassing a legal war chest for the oil spill.

In this sense, Cameron gave BP what it wanted in making the $250 million payment, by adding one more voice to the BP-led chorus saying that the oil spill was the result of no single company -- this is what BP needs to fend off the charges of gross negligence. The BP release said that Cameron, like BP, acknowledges that "the Deepwater Horizon accident resulted from complex and interlinked causes involving multiple parties."

And in a fitting capitalist irony, Cameron has maintained since the spill and its blowout preventer failure that any new regulations requiring better blowout preventers will be a boon to its business, though it's stock has not reacted as if a boon to its business is coming, down 7% this year as the general deepwater market and Gulf of Mexico drilling has slowly crept back from the Macondo standstill.

BP recently alleged that Halliburton destroyed important -- and damning -- documentation about its well tests at the Macondo site, tests that would prove, as former BP CEO Tony Hayward said long ago, the oil spill occurred as a result of a "bad cement job," by Halliburton. The legal spat between Halliburton and BP has been full throttle since Hayward's claim, when Halliburton took the unprecedented step of posting its contract with BP for the Macondo well on its Web site to prove its full indemnification. Transocean is also in the thick of reams of legal wars of words and allegations with BP.

The settlement with Cameron follows settlements with MOEX and Anadarko Petroleum ( APC), which was the most significant settlement to date, and at $4 billion was in line with industry expectations for Anadarko's 25% stake in the well. For BP, Friday marks a minor monetary victory in the oil spill war, and the big legal battles are far from over.

It's also pretty minor as far as oil spill fines in the news this week specifically, with the Brazilian federal prosecutor's office suing Chevron ( CVX) and Transocean ( RIG) earlier this week for $10.7 billion for a spill in Chevron's Frade field that is estimated at between 2,000 and 3,000 barrels of oil. BP is estimated to have spilled as much as 4 million barrels of oil in the Macondo disaster.

-- Written by Eric Rosenbaum from New York.

>To contact the writer of this article, click here: Eric Rosenbaum.

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