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Anadarko Attempts to Reach Tronox Settlement at ‘Impasse’

Anadarko Petroleum Corp. (APC), the second- largest independent U.S. oil and natural-gas producer by market value, said attempts to reach a settlement in a $25 billion lawsuit brought against its Kerr-McGee Corp. unit by the U.S. and creditors of Tronox Inc. have reached an “impasse.”

Anadarko said the “reasonable range” of a potential loss in the case is zero to $1.4 billion, according to a regulatory filing by The Woodlands, Texas-based company today. Anadarko sees the possibility of settling as “remote,” with litigation the likely form of resolution, it said.

The low end of the company’s range is based on a view that it “will more likely than not prevail” in the case, Anadarko said. The high end comes from the amount Anadarko estimates Kerr-McGee received at the time Tronox was spun off, or about $985 million plus interest, according to the filing.

Anadarko also said $525 million in previous charges accrued for a possible settlement has been reversed. The company said the charge no longer applies because it no longer seems “probable” the parties would reach a settlement. The company said it’s still “confident in the merits of its position” in the case.

The lawsuit is over environmental claims and tort claims related to Tronox’s 2005 spinoff from Kerr-McGee, which was later acquired by Anadarko.

Polluted Sites

In the suit, which went to trial May 15 in Manhattan Bankruptcy Court, Anadarko’s Kerr-McGee unit is accused of being part of a two-step transaction that defrauded the Environmental Protection Agency of the money to clean 2,772 polluted sites. It was originally brought by creditors of Tronox and was taken over by the U.S. government, which seeks as much as $25 billion to clean up the sites.

Anadarko has said Kerr-McGee reorganized to separate its chemical business from its oil and gas business and maximize shareholder value.

Separately, Anadarko and former officers of its Kerr-McGee unit settled a related lawsuit about the same two-step transaction brought by shareholders of Tronox earlier this week. The settlement, for $35 million in cash, resolves fraud claims against the company and individuals including Luke Corbett, Robert Wohleber and Gregory Pilcher.

ConocoPhillips (COP) is the largest U.S. independent oil and gas producer by market value, followed by Anadarko, based on today’s closing prices in New York. Independent oil companies don’t own refineries or chemical businesses.

Anadarko fell 1.3 percent to $68.90 at 4:55 p.m. in New York.

The bankruptcy case is Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Edward Klump in Houston at eklump@bloomberg.net; Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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