Even though there are agreements in place which indemnify or protect oil companies like Halliburton (NYSE:HAL), Transocean (NYSE:RIG), Anadarko Petroleum (NYSE:APC) and Cameron International (NYSE:CAM) from liability in most cases, in reference to the BP (NYSE:BP) oil spill, it's hard to imagine they'll escape completely form bearing some responsibility in the matter.
The courts have said sometime in 2011 they should reach a conclusion concerning that, although in some cases, like the blowout preventer provided by Cameron International, it's going to take some time to accurately investigate it to see where the failure came.
The recent conclusion of the oil spill commission that Halliburton provided an unstable cement mix used to seal the failed oil well puts pressure on these companies as to whether or not the indemnity agreements will hold under that type of scrutiny.
BP could be helped immensely if all of these companies would have to share in paying for the disaster, as since they've already been paying for almost everything, for them it would be money returned, which could dramatically improve their financial health whe spread across the companies mentioned above. It would be a game changer for them.
For the other companies mentioned above, there is more at risk though, as if they're considered negligent and liable in some ways, there is no doubt more lawsuits will emerge which will cost them and change their financial circumstances and reputation management will have to ensue.
There is also the increased costs of legal battles and insuring their debt via credit-default swaps.
So while BP, other than awaiting the final determination of whether or not they were grossly negligent in the accident, which could result in a fine of up to $17.6 billion, they have faced pretty much the worst case scenario and are coming out on the other side of it, as far as understanding their liabilities.
The other companies are now entering into the stage of uncertainty in relationship to liability, and that could weigh on the stocks for some time until that is cleared away.
Halliburton's role in the cement job reminds shareholders and investors that the situation is far from being resolved for all parties involved.
Showing posts with label Halliburton Liabilitiy. Show all posts
Showing posts with label Halliburton Liabilitiy. Show all posts
Monday, November 1, 2010
Goldman (NYSE:GS) Says Buy Halliburton (NYSE:HAL), Citing Liability Headlines
Goldman Sachs (NYSE:GS) said investors should buy into Halliburton (NYSE:HAL) based on liability headlines which very likely won't pan out in their view.
Although there are a lot of contradictory stories emerging from the report from the National Commission on the BP Deepwater Horizon Oil Spill, which concluded the cement mud used to seal the Macondo well of BP (NYSE:BP) was unstable, Goldman seems sure Halliburton did what it could to provide a safe seal, and the drop in share price should be considered a buying opportunity.
"The slurry that was actually used on the well was tested, and passed, prior
to being pumped," Goldman asserted.
Goldman reminded clients in their note that "due to the low number of stabilizers that BP chose to use and urged BP to conduct all proper tests (including a cement bond log, which was not done)."
"At the end of the day, BP ran a negative pressure test and accepted the inconclusive results", Goldman concluded.
This seems to be far too optimistic, far too soon, to come to this conclusion, which bears the resemblance of cheerleading rather than a decision based upon objective response to the conditions.
It's not that Goldman may or may not end up being right about Halliburton, it's that it seems too soon to look at this as an opportunity to buy before this part of the narrative plays out.
Although there are a lot of contradictory stories emerging from the report from the National Commission on the BP Deepwater Horizon Oil Spill, which concluded the cement mud used to seal the Macondo well of BP (NYSE:BP) was unstable, Goldman seems sure Halliburton did what it could to provide a safe seal, and the drop in share price should be considered a buying opportunity.
"The slurry that was actually used on the well was tested, and passed, prior
to being pumped," Goldman asserted.
Goldman reminded clients in their note that "due to the low number of stabilizers that BP chose to use and urged BP to conduct all proper tests (including a cement bond log, which was not done)."
"At the end of the day, BP ran a negative pressure test and accepted the inconclusive results", Goldman concluded.
This seems to be far too optimistic, far too soon, to come to this conclusion, which bears the resemblance of cheerleading rather than a decision based upon objective response to the conditions.
It's not that Goldman may or may not end up being right about Halliburton, it's that it seems too soon to look at this as an opportunity to buy before this part of the narrative plays out.
Halliburton (NYSE:HAL) Share Price Driven by Headlines in Near Term on BP (NYSE:BP) Cement Job
There is no doubt in the short term that Halliburton (NYSE:HAL) shares will fluctuate based on headlines related to uncertainties surrounding the cement job which was identified as unstable by the oil spill commission investigating the cement mixture used on BP's (NYSE:BP) Macondo well.
As the smoke clears some though, a number of financial institutions consider the risk is small for ancillary companies like Halliburton, and believe will be indemnified in the incident.
Canaccord said, "While not a smoking gun, the findings do put more focus on HAL’s cementing role in the Macondo incident. However, do keep in mind that BP made all final decisions, and an unstable cement test alone does not put liability on HAL. In short, we believe that BP remains operator with full responsibility, and HAL still has indemnification protection, from reservoir pollution or contamination, outside of gross negligence (as stated in its service contract with BP, posted in response to today’s letter)."
"Chevron (NYSE:CVX) will discuss the report at the public hearing on Nov 9. Expect headlines to drive stock near term. Market has generally dismissed significant liability for other third-party contractors involved, such as Transocean (NYSE:RIG) and Cameron (NYSE:CAM), whose operations have also been called into question. In other words, we believe the market has scrutinized third-party liability and contract indemnity over the past 6 months, and has come away anticipating BP to bear the full brunt of financial responsibility."
Halliburton closed Friday at $31.86, gaining $0.18, or 0.57 percent. Canaccord has a price target of $45 on the oil services company.
As the smoke clears some though, a number of financial institutions consider the risk is small for ancillary companies like Halliburton, and believe will be indemnified in the incident.
Canaccord said, "While not a smoking gun, the findings do put more focus on HAL’s cementing role in the Macondo incident. However, do keep in mind that BP made all final decisions, and an unstable cement test alone does not put liability on HAL. In short, we believe that BP remains operator with full responsibility, and HAL still has indemnification protection, from reservoir pollution or contamination, outside of gross negligence (as stated in its service contract with BP, posted in response to today’s letter)."
"Chevron (NYSE:CVX) will discuss the report at the public hearing on Nov 9. Expect headlines to drive stock near term. Market has generally dismissed significant liability for other third-party contractors involved, such as Transocean (NYSE:RIG) and Cameron (NYSE:CAM), whose operations have also been called into question. In other words, we believe the market has scrutinized third-party liability and contract indemnity over the past 6 months, and has come away anticipating BP to bear the full brunt of financial responsibility."
Halliburton closed Friday at $31.86, gaining $0.18, or 0.57 percent. Canaccord has a price target of $45 on the oil services company.
Friday, October 29, 2010
Is Halliburton (NYSE:HAL) Protected from BP (NYSE:BP) Via Indemnity?
After the oil spill commission released a report saying the cement mix used in the Macondo well was unstable, Halliburton (NYSE:HAL) took a big hit, but began to almost immediately fight back, hoping to hold onto their indemnity from their contract with BP (NYSE:BP).
The question which will determine liability and whether or not Halliburton will remain protected would be the quality of work performed.
Here's the agreement:
COMPANY shall save, indemnify, release, defend, and hold harmless CONTRACTOR GROUP against all claims, losses, damages, costs (including legal costs) expenses and liabilities resulting from:
(a) loss or damage to any well or hole (including the cost to re-drill);
(b) blowout, fire, explosion, cratering, or any uncontrolled well condition (including the costs to control a wild well and the removal of debris);
BP is the company mentioned and Halliburton the contractor group, which I put in capital letters.
Already admitting they didn't completely finish the testing on the final cement formulation used, it's unknown at this time if that does anything to void the above agreement between the two companies.
Consequently, until that is sorted out, Halliburton will have this hanging over them, and more than likely their share price will swing in both directions on bits and pieces of news as it emerges, as well as rumors.
At this time it seems there are questions as to whether the indemnity will hold. But that's a long way from a certainty.
The question which will determine liability and whether or not Halliburton will remain protected would be the quality of work performed.
Here's the agreement:
COMPANY shall save, indemnify, release, defend, and hold harmless CONTRACTOR GROUP against all claims, losses, damages, costs (including legal costs) expenses and liabilities resulting from:
(a) loss or damage to any well or hole (including the cost to re-drill);
(b) blowout, fire, explosion, cratering, or any uncontrolled well condition (including the costs to control a wild well and the removal of debris);
BP is the company mentioned and Halliburton the contractor group, which I put in capital letters.
Already admitting they didn't completely finish the testing on the final cement formulation used, it's unknown at this time if that does anything to void the above agreement between the two companies.
Consequently, until that is sorted out, Halliburton will have this hanging over them, and more than likely their share price will swing in both directions on bits and pieces of news as it emerges, as well as rumors.
At this time it seems there are questions as to whether the indemnity will hold. But that's a long way from a certainty.
Halliburton (NYSE:HAL) Admits Skipping Major Test on BP (NYSE:BP) Cement Job
While disputing some of the allegations concerning the cement mixture used to seal the BP (NYSE:BP) oil well before it failed, Halliburton did admit they didn't perform a critical test on the final cement formula used on Macondo before it blew.
Tests performed by the oil spill commission have shown the cement formulation used was unstable.
The final cement mix used wasn't tested concerning its stability for use.
BP, as well as others, have pointed to the cement mix as one of the key elements as to why the accident happened. With Halliburton being the cement contractor, it could end up costing them into the billions as a result, although the investigation is far from over and conclusive, as Halliburton still maintains the mixture asserted to be unstable isn't the same mixture they used.
Halliburton said in a statement: "Contrary to the letter...the slurry tested in February was not 'a very similar foam slurry design to the one actually pumped.'"
Tests performed by the oil spill commission have shown the cement formulation used was unstable.
The final cement mix used wasn't tested concerning its stability for use.
BP, as well as others, have pointed to the cement mix as one of the key elements as to why the accident happened. With Halliburton being the cement contractor, it could end up costing them into the billions as a result, although the investigation is far from over and conclusive, as Halliburton still maintains the mixture asserted to be unstable isn't the same mixture they used.
Halliburton said in a statement: "Contrary to the letter...the slurry tested in February was not 'a very similar foam slurry design to the one actually pumped.'"
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