Hounding Halliburton

Halliburton/BP: Halliburton has been dragged further into the BP mess. The oil contractor lost $3 billion of market value on charges by a presidential commission that it did a shoddy job cementing the rig that cracked and led to the disastrous leak. That suggests investors expect Halliburton to pay a big slice of BP's $20 billion cleanup fund. It's possible - but don't count on it.

Well blowups are seldom the result of a single blunder. And BP's epic Gulf of Mexico spill is certainly no exception. So it should come as no surprise there were problems with the cement job done by Halliburton. Soon after, BP was quick to parcel out responsibility. Any confirming evidence will help provide BP's public relations with some cover. Equally, any indication of Halliburton error will spread the reputational damage.

 

Yet it is too early to say that Halliburton will suffer such a substantial financial hit. The letter from the panel's lead investigator was less damning than some initial press reports indicated. Halliburton shared test results with BP suggesting its cement had "failed to meet industry standards." Had Halliburton failed to disclose material details this would look far worse. BP also had time to react and rectify the situation since the finding came more than a month before the blowup.

The findings also take a more sympathetic turn. Cementing is a "complex endeavor," the investigator says, and "cementing failures are not uncommon even in the best of circumstances." When failures occur the industry can conduct pressure tests and cement evaluation logs. The investigator adds that BP, and possibly Transocean - the other main contractor - "misinterpreted" or "chose not to conduct such tests at the Macondo well."

Of course Halliburton isn't completely off the hook either. It is almost certain to rack up expenses in the multi-year legal battle over liability for the spill. But unlike Anadarko Petroleum Corporation, BP's silent partner in Macondo and owner of a 25 percent stake, Halliburton was a contractor. It's hard to believe it will be stuck footing such a chunky portion of the bill.