BP said it was "in their mutual best interests, and the agreement is not an admission of liability by either party." The companies are dropping all claims against one another, they said.
The settlement comes in advance of a federal trial over the catastrophic Gulf oil spill. The non-jury trial is slated to begin in February and determine fault in the April 20, 2010, explosion and subsequent oil spill off the Louisiana coast of more than 200 million gallons of oil.
The settlement with Cameron does not end the legal fighting over the blowout of the Macondo well, which was owned by London-based BP and two partners, MOEX and Anadarko. BP has already settled claims with those two companies and a third company, Weatherford, the maker of a part used in the well.
"Today's settlement allows BP and Cameron to put our legal issues behind us and move forward to improve safety in the drilling industry," said Bob Dudley, BP group chief executive.
"Unfortunately, other companies persist in refusing to accept responsibility for their roles in the accident and for contributing to restoration efforts," Dudley said in a swipe at Halliburton Corp. and Transocean Ltd. Halliburton supplied critical cement to seal the well and Transocean was the company drilling the well.
Probes of the Deepwater Horizon explosion by the federal government and independent scientists and engineers have found all three companies were at fault for a series of decisions and actions that led to the Macondo well blowout, the nation's largest offshore oil spill.
BP is engaged in an intense legal fight with Halliburton Corp. and Transocean. Earlier this month, BP went so far as to accuse Halliburton employees of covering up damaging evidence about a cement mixture Halliburton used in drilling the well.
BP said it would use the $250 million from Cameron to pay for the cost of cleaning up from the spill and paying individual damages claims by people, businesses and government entities hurt by the spill. BP said it has spent about $7.5 billion so far of those claims. But the British company faces billions of dollars in additional damages and fines.
Under the agreement, BP said Houston-based Cameron is no longer responsible for any additional cleanup costs related to the spill. But BP said the agreement does not cover civil, criminal and administrative fines and other penalties that might arise out of the court proceedings.
Jack Moore, the chairman and CEO Cameron, said the agreement with BP "removes uncertainty facing Cameron" as litigation intensifies over the Deepwater Horizon explosion.
"This eliminates all significant exposure to historical and future claims related to this incident," Moore said.
Moore said Cameron does not expect to have to pay much for possible court fines and penalties. "We do not consider these items to represent a significant risk to Cameron," he said.
Cameron said its insurers were expected to fund at least $170 million of the $250 million payment the company agreed to make to BP.
BP and Cameron also pledged to "improve safety in the drilling industry" and do more to improve blowout preventers.