Oilfield services provider Halliburton (NYSE:HAL) saw its shares fall by almost 5% each of the last two days after BP (NYSE:BP) accused the company of destroying evidence related to last year’s Gulf of Mexico spill.  BP claimed that the evidence showed that the cement mixture Halliburton used to seal the well was not stable. Looking to defend itself, Halliburton spokesperson Beverly Stafford said that BP was trying to pull attention away from its own engineering mistakes that had led to the disaster, and that BP had withheld data that was needed to design the cement slurry.  The company has also disputed an earlier Presidential committee statement that the cement slurry used in the well was an important cause of the blowout that killed 11 employees.
We have a $54 price estimate for Halliburton which is a 50% premium over its current stock price.
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Cement failure could play a crucial role
The Presidential committee found that the cement played a crucial role in the blowout by allowing hydrocarbons to pass through it. This finding was based on independent studies done by Chevron.  Halliburton staff has said that the cement was designed to be stable and that the tests were done informally and in a manner not approved by the company. The company claims that the leaked hydrocarbons made their way into the wellbore by other means.
Proving that the cement mixture from Halliburton was partially responsible for the incident would be a major boost for BP, which faces severe repercussions if found guilty of gross negligence. Such a ruling would result in BP facing punitive actions and could also force the oil major to suspend drilling in the Gulf of Mexico. where it presently holds significant acreage. Restarting operations in the Gulf is an important part of the oil major’s strategy to boost declining output.
Halliburton has claimed that BP is fully responsible for the blowout through engineering decisions designed to save time and money by increasing risks and withholding data that was necessary to design the cement slurry.  To date, BP has met most of the expenses related to the spill while its equity partners in the Macondo partners have chipped in a few billion dollars. (See: BP & Anadarko Make up in $4 Billion Settlement Benefitting Both Parties) BP is now trying to get subcontractors to accept a part of the blame and reduce its own liability from the incident.