Halliburton Stock Looks More Vulnerable to BP Claims on Spill

December 6th, 2011 by Trefis Team
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British oil major BP (NYSE:BP) rolled out its latest legal maneuver in the Gulf of Mexico spill case by accusing subcontractor Halliburton (NYSE:HAL) of destroying evidence that could be used to prove it shared a part of the blame for the disaster that killed 11 personnel and spewed millions of barrels of oil into the ocean. [1] Halliburton was specifically accused of destroying test samples that showed that the cement used to seal the well was unstable. In addition, BP also charged the oilfield services firm of ‘suppressing’ computer models that would implicate it in case for being at fault.

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Complex legal battle continues

Faced with a potential liability that might run into a several tens of billions of dollars, BP has been making efforts to push some of the damages on to equity partners and subcontractors involved in the Deepwater spill. So far, it has had mixed success in the legal campaign as contractors have fought back and filed counter lawsuits seeking to push all responsibility on to BP. The government agency BOMRE however released a report a few weeks ago, naming two of the subcontractors – Halliburton and Transocean as being partly responsible for the event. Combined, BP and Halliburton face around 350 court cases from coastal property holders and private players, and BP’s stock could see a meaningful boost if it can make a case that Halliburton needs to share some of the financial losses resulting from the incident.

The latest allegations

In the latest salvo against Halliburton, BP has accused the company of deliberately destroying and suppressing evidence to eliminate the risk of it being used against the company. [1] The oil major also requested that Halliburton should be forced to turn over the computer used to run the simulations to a third party for independent examinations. Halliburton on its end maintains that the cement had performed as expected and that it was just carrying out the tasks as directed by BP.

The latest allegations are based on a testimony from Halliburton employee Rickey Morgan who allegedly destroyed the test results to prevent them being ‘misinterpreted’ and used against the company. Morgan went on to testify that the cement had not performed as expected during the test due to which he disposed the samples and kept from taking any measurements. The test was then replicated and yielded similar results. The company’s in-house labs used up all the cement samples from the wells preventing third party examination. The company also failed to share computer models it had used to claim that the blowout was the result of BP’s decision of not using enough centralizers to keep the pipe aligned with the well. [1]

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Notes:
  1. BP: Halliburton Destroyed Evidence in Spill Case, Bloomberg [↩] [↩] [↩]