BP must cover some Transocean oil spill damages

Thu Jan 26, 2012 8:43pm EST
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By Jonathan Stempel

(Reuters) - A federal judge on Thursday said BP Plc must indemnify Transocean Ltd for some compensatory damage claims over the 2010 Gulf of Mexico oil spill.

U.S. District Judge Carl Barbier, who oversees multistate litigation over the spill, agreed with Transocean that the Swiss driller was not responsible for compensatory damage claims raised by third parties for oil spilled below the ocean surface.

He also ruled, however, that London-based BP need not indemnify Transocean for punitive damages, or civil penalties imposed by the U.S. government under the federal Clean Water Act.

Thursday's decision reduces the potential liability Transocean faces over the April 20, 2010 Deepwater Horizon drilling rig explosion that caused 11 deaths and the largest offshore oil spill in U.S. history.

Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill.

Shares of Transocean rose 8.9 percent in after-hours trading, and BP shares fell 0.6 percent.

"Indemnification from compensatory damages is key for Transocean," whose litigation exposure is now "materially diminished," UBS Securities LLC analyst Angie Sedita wrote in a research note. She has a "buy" rating on Transocean.

Sedita said BP has estimated its Clean Water Act liability at $3.5 billion, but that other estimates are as high as $6 billion. She also said Transocean has $950 million of insurance coverage for personal injury and third-party claims.   Continued...

<p>Debris and oil from the Deepwater Horizon drilling platform float in the Gulf of Mexico after the rig sank, off Louisiana April 22, 2010, in this handout photograph. REUTERS/U.S. Coast Guard/Handout</p>