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.

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.