BP must cover some of Transocean spill damages.
US 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 US government under the federal Clean Water Act.
The 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 US history.
Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill.
"Indemnification from compensatory damages is key for Transocean," whose litigation exposure is now "materially diminished," UBS Securities 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.
Barbier oversees several hundred cases related to the spill, including a $40 billion lawsuit that BP filed against Transocean last April.
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