Halliburton prepares for long drilling ban

HOUSTON/SAN FRANCISCO (BestGrowthStock) – Halliburton Co, which did cementing work on the ruptured Gulf of Mexico well, said on Wednesday it expects to move people and equipment out of the region due to the U.S. government halt of deepwater drilling.

The company now has 2,200 of its 50,000 employees working in the region, accounting for 13 percent of its business in the first quarter, of which two-thirds was deepwater activities.

“Halliburton is engaged in discussions with its customers and anticipates relocating equipment and personnel to other markets as appropriate,” the company said in a filing with regulators.

Halliburton expects a Gulf of Mexico deepwater hiatus for at least six months, and possibly longer. But executive Tim Probert noted on a conference call that the U.S. moratorium did allow for well completions and maintenance, so activity would not completely stop.

Probert, the president of global business lines who was recently also named chief health, safety and environment officer, said the industry had plenty of work to do in the down time to prepare for a new regulatory regime.

“We shouldn’t consider the next six months to be a completely dead period,” he said. “Clearly, it’s in the interest of the nation to ensure we have the ability to continue to produce hydrocarbons safely in offshore waters, and I think everybody’s going to work diligently toward that.”

BP Plc was the operator on the well which ruptured on April 20, killing 11 workers and sinking a Transocean Ltd drilling rig. The well has since spewed as much as 19,000 barrels of oil a day into the Gulf of Mexico.

Investors are increasingly worried about Halliburton’s financial exposure to the spill. The company’s credit default swaps, protecting its debt, rose 35 basis points to 157 basis points on Wednesday, more than double their level a few days before, according to Markit Intraday data.

Executives repeated on the call that the company was indemnified under its contract with BP, but Halliburton has $600 million of general liability insurance, and $3.2 billion of cash and $1.2 billion in revolving credit to cope with any uncertainties.

Asked about the potential liability for gross negligence, Chief Financial Officer Mark McCollum said while this was theoretically possible, it would not apply in this case.

“I’m not a lawyer, but the general standard for gross negligence is a willful disregard for life and property,” he said. “When we make the statement that we believe we followed BP’s instructions, you can’t develop a legal argument around gross negligence if you follow their instructions.”

Shares of Halliburton, with headquarters in Houston and Dubai, rose 11 percent to $23.49 in midday trading, reversing the losses of the previous day amid a sector-wide sell-off.

Probert said Gulf of Mexico shallow-water activity would start picking up within weeks, but anticipated pricing pressure on services during the moratorium due to excess capacity.

As for the rest of its business, McCollum said U.S. on-shore activity was growing stronger in the second quarter and international activity, of which about half is offshore, would continue recovering through this year.

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(Reporting by Anna Driver in Houston and Braden Reddall in San Francisco; Editing by Robert MacMillan)

Halliburton prepares for long drilling ban