UPDATE 2-Halliburton prepares for long drilling ban

* Deepwater activity in hiatus six months or longer

* Halliburton says not a dead period, plenty of work to do

* Halliburton shrs up 11 pct; debt protection cost doubles
(Adds executive’s quotes, business outlook, Gulf of Mexico
operation details, updates shares)

HOUSTON/SAN FRANCISCO, June 2 (BestGrowthStock) – Halliburton Co
(HAL.N: ), 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

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 (BP.N: ) was the operator on the well which ruptured
on April 20, killing 11 workers and sinking a Transocean Ltd
(RIG.N: ) (RIGN.S: ) 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. [ID:nN02168753]

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

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 wilful 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)

UPDATE 2-Halliburton prepares for long drilling ban