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Halliburton Plea May Aid BP in Oil Spill Battle

Posted on 07 Aug 2013 by Neilson

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BPBP appeared to gain an edge in the battle over liability for the 2010 Gulf of Mexico spill, after Halliburton abandoned one of its arguments that tried to paint the British oil company as unconcerned about well safety.

Halliburton, which did the cementing work for BP's well, pleaded guilty to destroying evidence of internal tests it conducted showing there was no difference between the effectiveness of putting six or 21 casing centralizers on the well.

Centralizers help stabilize the well bore during cementing and, prior to the settlement with the US Department of Justice, Halliburton had sought in court proceedings to pin blame on BP for the blowout because of its decision to save "time and money" by using only six centralisers.

A payment of just $200,000 to the Department of Justice ends the DOJ's case against Halliburton. At the same time, the plea seems to hurt Halliburton as it seeks to settle its share of private claims over the disaster, currently estimated at $1.3 billion.

John Coffee of Columbia Law School said it would now be less plausible for Halliburton to argue in any litigation between the two companies that it had warned BP about something for which the evidence was destroyed.

"This is a zero sum game between BP and Halliburton, particularly when it undercuts (Halliburton's) argument they had an honest theory of why the cement wouldn't hold," Coffee said. "If it's an honest theory, why would you destroy all the evidence?"

Nonetheless, Halliburton shares rose nearly 4 percent, since its plea announcement coincided with it unveiling a $3.3 billion share buyback. Scott Gruber, analyst at Bernstein Research, said the company appeared more confident its oil spill liability was manageable in making a repurchase offer that would represent 8 percent of its outstanding shares at current prices.

James West at Barclays believed Halliburton could even issue new debt to accelerate its buyback program. "Though we think a resolution of the Macondo liability is likely required before (Halliburton) makes any significant changes to its capital structure," he added in a note to investors. Halliburton, BP and rig owner Transocean are all defendants in a federal civil trial that began in February to apportion blame and set damages for Macondo. The trial, under Judge Carl Barbier, is scheduled to resume.

According to Margaret Thomas at Louisiana State University's law school, Barbier could admit Halliburton's criminal admission in the case and respond in number of ways, including monetary sanctions. She said he could even go so far as to strike Halliburton's pleadings.