Anadarko Reaches $5.15 Bln Settlement On Pollution Claims Against Kerr-McGee

(RTTNews) - Shares of Anadarko Petroleum Corp. (APC) closed higher by nearly 15 percent on Thursday after the oil and natural gas producer announced a $5.15 billion settlement deal with plaintiffs and the U.S. government to resolve all claims against its wholly-owned subsidiary Kerr-McGee Corp. The company agreed to settle claims for alleged actions by Kerr-McGee prior to its acquisition by Anadarko in 2006.

"This settlement agreement with the Litigation Trust and the U.S. Government eliminates the uncertainty this dispute has created, and the proceeds will fund the remediation and cleanup of the legacy environmental liabilities and tort claims," Anadarko Chairman, President and CEO Al Walker said in a statement.

The settlement, that resolves a long-running lawsuit, is now billed as the largest ever in the U.S after the $4 billion settlement reached by BP plc (BP) in 2012 to resolve claims over the 2010 Deepwater Horizon disaster that led to a massive oil spill.

The settlement is subject to recommendation by the U.S. Bankruptcy Court and approval of the U.S. District Court, both in the Southern District of New York, and the issuance of an injunction barring similar claims from being asserted by third parties.

The settlement process is currently expected to be completed prior to the end of the third quarter of 2014.

However, the settlement amount is well below the $25 billion originally claimed by the US government and plaintiffs, and also below the $14.5 billion proposed in a court ruling by U.S. Bankruptcy Judge Allan Gropper in mid-December.

The settlement will see Anadarko paying a total of $5.15 billion, which includes a principal sum of about $3.98 billion plus a 6 percent interest on the sum from May 2009. the date when the complaint was filed.

The U.S. government and the plaintiffs were seeking damages from Tronox, Inc. (TROX), which was a company created in 2005 through a spin-off of the polluting chemicals operations of Kerr-McGee. Anadarko then acquired Kerr-McGee in 2006 in a $18 billion deal and Tronox filed for Chapter 11 bankruptcy protection in January 2009. Tronox used bankruptcy protection to shed the environmental liabilities, and emerged from bankruptcy in February 2011.

As part of the bankruptcy proceedings, Tronox, along with the U.S. Government, filed suit against Kerr-McGee for its fraudulent transfer of billions of dollars of pre-existing environmental and tort liabilities. Kerr-McGee was alleged to have acted with intent to delay and hinder creditors of Tronox, when it was spun off.

Kerr-McGee is charged of leaving toxic waste at more than 4,000 sites covered by settlement. All litigation's involving the environmental obligations of Tronox will be settled with this deal. The majority of the settlement amount of 88 percent will be used to clean up the sites, while the remaining 12 percent amount will be used to settle individual claims from people who fell sick due to the pollution.

Additionally, Anadarko said it expects to record a gross tax benefit of about $1.65 billion related to the settlement in its first-quarter 2014 financial statements. This will be partially offset by about $1.10 billion in uncertain tax positions, currently resulting in a net tax benefit of about $550 million.

"Investor focus can now return to the tremendous value embedded in Anadarko's asset base, allowing our peer-leading operational and exploration results to again become the basis for valuation. We are grateful to our stakeholders who have maintained their confidence and trust in our people and our assets," Walker added.

APC closed Thursday's regular trading session at $99.02, up $12.55 or 14.51% on a volume of 44.80 million shares after hitting an all-time high of $100.00 in intra-day trading.