NEW ORLEANS (AP) -- A BP PLC contractor has agreed to pay the British oil giant $75 million to settle all potential claims between the companies over last year's deadly rig explosion and the massive oil spill it spawned in the Gulf of Mexico.
In exchange for the payment, BP has agreed to cover Weatherford U.S. LP for compensatory claims related to the disaster, including those over environmental damage and economic losses. Civil and criminal fines and penalties and claims for punitive damages aren't covered by the indemnity agreement.
BP said in Monday's announcement that it will apply the money to the $20 billion fund it created to compensate individuals and businesses after the Deepwater Horizon rig exploded, killing 11 workers.
Weatherford, a Swiss-based oilfield service company, manufactured the float collar used in BP's blown-out well. The device was designed to help contain the cement at the bottom of the well.
Weatherford isn't the first company to settle out of court with BP. MOEX Offshore 2007 LLC, one of BP's minority partners on the project, agreed last month to pay BP $1 billion to settle all claims between them.
"This settlement allows BP and Weatherford to put our legal issues behind us and move forward together in strengthening processes and procedures, safety and best practices in offshore drilling," BP America Chairman and President Lamar McKay said in a statement.
BP said the two companies agree with a presidential commission's conclusion that the disaster "was the product of complex causes involving multiple parties." Weatherford said the companies have agreed to work with each other to improve the safety of offshore drilling.
"We are extremely pleased to have reached an amicable resolution with BP, a valued customer, that gives our shareholders finality with respect to the vast majority of any potential exposure Weatherford might have from last year's incident in the Gulf," Weatherford president and CEO Bernard J. Duroc-Danner said in a statement.
Weatherford said its insurance policies will cover the entire $75 million payment.