U.S. energy behemoth Chevron Corporation (CVX) is willing to shell out $150 million to resolve two civil lawsuits in Brazil associated with an oil leak 74 miles off the coast of Rio de Janeiro in November 2011. The civil suits – filed by the Latin American nation’s federal prosecutors – are seeking about $20 billion in damages from Chevron.
The company has already accepted full responsibility for the spill at its deepwater Frade field in November last year, about 230 miles from the beaches of Rio de Janeiro. Chevron acknowledged that it had miscalculated the pressure and rock strength in the exploratory well.
However, Brazilian officials accused Chevron and Transocean Ltd. (RIG) – operator of the rig at the Frade project – of being negligent and slow in reacting to the incident apart from a lack of planning and environmental management.
The final approval for Chevron’s settlement offer is expected sometime in January 2013, following an environmental agency report on the spill. For the deal to occur, the regulator’s findings must agree with the super-major’s claim that the oil leak had no major impact on the environment.
However, a criminal proceeding against the involved companies (Chevron and Transocean) and their seventeen executives will continue.
San Ramon, California-based Chevron is one of the largest publicly traded oil and gas firms in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.