CAM Cameron International Corp.

Major oilfield services provider Halliburton Co. (HAL) has filed a suit in the Texas state court against British energy giant BP plc (BP) accusing it of negligent misrepresentation, business disparagement and defamation related to last year’s Deepwater Horizon rig disaster. The Texas-based company, which provided cementing job for the Macondo well in the Gulf of Mexico (GoM), has blamed BP of concealing key information that led to the biggest environmental catastrophe in U.S. history.

As a reminder, on April 20, 2010, offshore driller Transocean Ltd’s (RIG) ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. GoM off the coast of Louisiana.

The incident killed 11 workers and spewed more than 200 million gallons of crude in what is touted as the country’s worst oil spill ever. Subsequently, a moratorium was imposed on offshore drilling at water depths of more than 500 feet in the region, which was lifted on October 12, 2010.

The lawsuit filed by Halliburton alleges that BP – the owner of the Macondo well with a 65% interest – provided wrong information about the actual location of oil and gas producing zones in the well prior to the cementing services performed by Halliburton.

Earlier in April this year, BP filed suits in the New Orleans federal court against two of its contractors – Transocean and Cameron International Corp. (CAM) – seeking billions of dollars in damages and other costs. The London-based group has accused Transocean and Cameron of negligence.

On the other hand, Transocean has pinpointed the root causes of the explosion as being tied to the BP’s ‘poor’ design of the well. BP overlooked  the risks associated with the Macondo well and did not communicate the danger, alleges Transocean. The drilling contractor’s report goes on to say that BP, together with Halliburton, was to be blamed for the ‘poor cement job’ that allowed the oil/gas to burst through the reservoir and reach the rig, causing the explosion.

Now, with Halliburton seeking to deflect the accusation to its employer, the legal battle over who is to blame for the accident gets more intense. According to reports, a federal trial is scheduled for next year to assess the degree of fault and the quantum of liability that lies with the companies.

BP and Transocean shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating whereas Cameron has a Zacks #2 Rank (short-term Buy rating). Halliburton currently retains a Zacks #1 Rank, or a short-term Strong Buy rating.

Longer-term, we are maintaining our Outperform recommendation on Halliburton, while being Neutral on the other stocks.

 
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HALLIBURTON CO (HAL): Free Stock Analysis Report
 
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