Has Halliburton been Indemnified?

Posted by Ian Cooper - Tuesday, November 2nd, 2010

From Options Trading Pit:

Halliburton (HAL) may have some brief upside here. BP said HAL provided poor cement for the Macondo well, which sent HAL shares screaming lower... but “Halliburton believes that significant differences between its internal cement tests and the Commission’s test results may be due to differences in the cement materials tested. The Commission tested off-the-shelf cement and additives, whereas Halliburton tested the unique blend of cement and additives that existed on the rig at the time Halliburton’s tests were conducted.”

And HAL is saying BP didn't perform or didn't follow through with precautionary measures that would have revealed any problems in the first place.

Plus:

According to the BP Report, the Transocean-maintained blowout preventer, which would have stopped hydrocarbon flow to the surface, failed to operate. In addition, according to the BP Report, Transocean failed to maintain safety shut-off equipment which might have prevented the incident.

Well logs and rig personnel confirm that the well was not flowing after the cement job. BP and/or others, following the misinterpreted negative tests conducted after the cement job, proceeded to displace mud in the production casing and riser with lighter seawater, allowing the well to flow. Given these numerous intervening causes, Halliburton does not believe that the foam cement design used on the Macondo well was the cause of the incident.

Better yet, the HAL culpability news actually makes HAL a buy. And it may be indemnified from BP woes:

“HAL is broadly indemnified from any damage caused by the reservoir. BP is responsible for oil flow from the reservoir, even if HAL was negligent,” according to the contract. According to Barron's, “The most important point seems to be clause 19.7, within the contracts indemnities section. It states, “All exclusions, releases of liabilities and indemnities given under this Clause…shall apply irrespective of cause and notwithstanding the negligence or breach of duty…of the indemnified PARTY…”

  0


Silver Pandas