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Largest environmental cleanup in DOJ history ends uncertainty for APC: stock celebrates

Manhattan federal Judge Katherine Forrest approved a deal yesterday to have Anadarko Petroleum Corp. (ticker: APC) pay $5.15 billion to clean up nuclear fuel and other pollution in the largest-ever environmental cleanup recovery in the Department of Justice’s history, Reuters reported.

Kerr-McGee Corp. (ticker: KMG), which Anadarko acquired in 2006, was accused of shuffling off its environmental responsibilities in order to make itself a more attractive acquisition. Tronox (ticker: TROXG), the company that was spun off of Kerr-McGee, claimed in its lawsuit that its bankruptcy was caused by the environmental liabilities it took on when Kerr-McGee split it off in 2005.

According to The Hill, Kerr-McGee was responsible for contaminating sites for 85 years with harmful toxins, including uranium, before its acquisition by Anadarko. Preet Bharara, U.S. attorney for the southern district of New York was quoted in The Hill, saying “Kerr-McGee left behind piles of radioactive waste when it stopped mining uranium … Kerr-McGee sought simply to walk away from it all in a corporate shell game.”

The $5.15 billion settlement will fund a wide array of projects across 2,000 U.S. sites, including $1 billion for the Navajo Nation, which was hit especially hard by the effects of Kerr-McGee’s old uranium mining operations, according to Reuters. Al Walker, Anadarko’s chairman and president, was quoted in The Hill, saying “This settlement agreement with the litigation trust and the U.S. government eliminates the uncertainty this dispute has created.” In its own statement, Anadarko said it is glad to close the case, and that all of Kerr-McGee’s illegal actions in the case took place before the acquisition.

The deal seems to have done wonders for Anadarko. Following the announcement, the company’s shares soared 15% to an all-time high, Bloomberg reported. Bloomberg attributes the gain to Anadarko being able to focus on growth now that it is no longer mired in litigation. Anadarko rose 1.3% to $100.35 at 11:48 a.m. in New York, raising the company’s market value to $51.4 billion.

Anadarko has operations in nearly a dozen major U.S. onshore resource plays, deepwater Gulf of Mexico, Alaska, Algeria, Brazil, Colombia, Ghana, Guyana, New Zealand, Mozambique, Kenya, and West and South Africa. On Oct. 28, the company reported Q3 2014 net income attributable to common shareholders of $1.087 billion, or $2.12 per share (diluted). Anadarko reported 2.79 BBOE of proved reserves at year-end 2013.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.