Anadarko is binary option on BP incompetence

Rival oilmen have every reason to cast BP as a rogue. But none more so than Anadarko, its silent partner in the leaking Macondo well. If BP is proven grossly negligent, Anadarko is absolved of liability. If that doesn't happen, it could face crippling costs.

Anadarko only invested in the Macondo well in December 2009 after drilling had already started. It had not a soul on the doomed rig and had not been consulted about the well design. Yet its 25 percent stake has ensured the drubbing of a lifetime. Even after accounting for the slide in peers' valuations, investors have sliced close to an extra $13 billion off Anadarko's market capitalization, leaving it worth some $22 billion.

That middle ground, though, doesn't reveal the dilemma facing investors. The chances are, either Anadarko will eventually escape practically scot free, or its share of the bill could end up being life-threateningly large.

To bring its tab down near zero, Anadarko needs to prove the accident stemmed from "gross negligence or willful misconduct" on the part of BP. Then it can legally escape stumping up its share of the cleanup cost. That determination would also make it easier for politicians to justify lifting the deep sea drilling ban -- a move that would remove another cloud hanging over Anadarko.

If instead Anadarko's darkest fears are realized, it could be on the hook for $15 billion or more, assuming the cost of the disaster tops $60 billion as research by Raymond James suggests. That bill is not the only worry. As the largest independent explorer in the deep waters off the U.S. coast, Anadarko would be a leading casualty of an extended freeze on drilling -- and that would be more likely if, instead of BP being fingered as the only miscreant, practices across the industry were found wanting.

That could seriously stretch the company's resources. Its cash pile of $3.7 billion could easily be gobbled up, along with the expected $4.2 billion of cash flow Raymond James expects this year.

Short-term, the uncertainty will surely weigh on Anadarko. Longer-term, its shareholders will be hoping for more evidence of BP's failings. After all, the company looks much like a binary option on the UK oil giant's incompetence.

[Fuente: By Christopher Swan, Reuters, 21Jun10]

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