Halliburton: Back on stage with the spotlight on them!

Halliburton (NYSE:HAL) continues to defend the fact they alerted BP (LON:BP.) about the results of the cement testing. It turns out that 3 out of 4 of the tests failed, and HAL appears to have failed to highlight this to BP who chose to go ahead with using it.  Tests carried out for the National Commission on the spill by Chevron have demonstrated the cement was not suitable, but HAL are insistent that the cement actually used on the well is different and was a one off production. They say that if it was brought up and tested it would prove sound. However, it seems that BP can’t really use this as an excuse. Reports show that they were warned about the potential failure of the cement but chose to go ahead anyway.

“Had BP conducted a cement bond log test, or had BP and others properly interpreted a negative pressure test, these tests would have revealed any problems with Halliburton’s cement… BP, as the well owner and operator, decided not to run a cement bond log test even through the appropriate personnel and equipment were on the rig and available to run that test,” says HalliburtonHalliburton also advised BP to install numerous devices to make sure the pipe was centred in the well before pumping cement, otherwise, the cement might develop small channels that gas could squeeze through. They recommended 21 in all. However, reports suggest that BP chose to only install 6. Halliburton warned of severe gas flow problems without these centering devices. In the end, it was a gas blow back which caused the fire and subsequent spill of just shy of 5 million barrels of crude. However, late on Thursday afternoon, Halliburton admitted skipping critical tests on the final formulation of the cement. This could have serious consequences on the amount of fines they are liable for; not only civil but criminal fines are likely. So, the game of high stakes blame shift continues. The loser will be seriously hit by very large fines, and will face many years of lawsuits. Halliburton is now centre of attention but what do the experts think?

Peter Hitchens an oil analyst at Panmure Gordon has said that:

“If BP can show that this is an unfortunate accident rather than its own gross negligence, it will lead to lower fines and costs.”So far, BP’s share price is discounting a loss in value of $65 billion–meaning the market believes gross negligence will be proven. Richard Griffith of Evolution Securities estimates the final bill is more likely to be nearer $25-30 billion. “If we are right then fair value of BP’s shares should be nearer 510p,” he said–20% up on its current level of 425p.Whatever excuses thrown out by HAL they are now well and truly back on stage with the spotlight on them!