What Will Halliburton's (NYSE:HAL) Failure Cost Them? What Will BP (NYSE:BP) Gain?

The narrative has changed quickly concerning the BP (NYSE:BP) oil spill, as the investigation surrounding the cement job performed by Halliburton (NYSE:HAL) could drastically change the liability outlook.

So far BP has rightly been the main focus of investigations, but that couldn't have remained the case throughout the entirety of the story because of there being so many contractors and others whose equipment and actions may have led to the failure on the Deepwater Horizon oil rig.

Investigators from the oil spill commission have determined the cement used by Halliburton was unstable, and Halliburton has admitted the final formulation used wasn't completed checked for its stability.

While Halliburton continues to dispute whether the actual formula they used is the one being tested, it seems it is close enough or accurate enough to make a judgment over, as the commission, and an independent study by Chevron (NYSE:CVX) seems to have confirmed.

With failures to completely test the mixture, there is no doubt Halliburton will incur some liability in the matter. It's only a matter of how much liability, not if they'll face it. There is also the question of whether they're insured enough to cover the liabilities, or it'll cost their bottom line.

It has already pushed up the costs of doing business through the increase in cost of their credit-default swaps, and there will surely be more to come.

For BP, this could be helpful once liability is determined. Whether or not it comes from an insurer or Halliburton directly, it could ease the liability load for them, and release capital over a period of time.

The other major element in liability is the blowout preventer provided by Cameron International (NYSE:CAM), which also failed to do its job. That's being tested at this time as to why it failed.

Concerning liability, BP has probably seen the worst, and anything like this is positive news for them from a financial perspective, but also helps them some reputationally, as people realize they weren't the sole company responsible for the disaster, and in some cases, like with the cement mixture, was out of their hands.

That does bring up something all oil companies said they've learned from this, and that is they must keep a much closer watch on contractors, even those like Halliburton, who had had a pretty good reputation as far as quality work goes.

Halliburton’s (NYSE:HAL) Shares Hammered After BP (NYSE:BP) Cement Report

There is no way to get around the potentially devastating report from the National Commission on the BP Deepwater Horizon Oil Spill, where Halliburton (NYSE:HAL) had the conclusion drawn that the cement they recommended using was unstable.

An independent investigation from Chevron (NYSE:CVX) performed on behalf of the commission reached the same conclusion, as well as did an internal investigation from BP.

Credit-default swaps almost immediately rose in price for Halliburton right after the news, and their stock got hammered, and will continue to be under pressure because of the unknown liabilities associated with the findings.

Whatever it is, in the short term Halliburton is in trouble, and that isn't going to change anytime soon.

The share price of Halliburton plunged to $31.68 at close, losing $2.74, or 7.96 percent, and continued to drop after hours.

Transocean (NYSE:RIG) Slashing Pay for Injured Workers to $25 a Day

In a recent court filing, Transocean (NYSE:RIG) notified its workers injured from the BP (NYSE:BP) oil rig explosion that they would be having their pay cut to $25 a day as of December 15, although they said the offer is on the table until December 31.

Of the 126 people working on the Deepwater Horizon rig, most worked for Transocean, with 9 out of the 11 workers who perished working for the company.

According to Transocean, only 17 members of their crew working on the oil rig were injured.

Most of those asserting they were injured made between $10,000 to $15,000 monthly working for Transocean, according to an attorney representing over 20 of the alleged injured.

Attorneys for the alleged injured say the pay cut will pressure their clients to settle more quickly than they otherwise would have. But of course to keep non-working employees on the payroll at the wages mentioned above is a recipe for economic disaster, and an unrealistic expectation.

Transocean made an offer to other rig workers in September, offering them lump sum payments equal to six months' salary.

Survivors of the workers who perished in the accident continue to receive full salary and benefits, along with those severely injured.

BP (NYSE:BP) Will Waive Liability Cap

Last week when BP (NYSE:BP) would go on record at a court hearing about waiving the liability cap instituted via the Oil Pollution Act of 1990, it caused a mini uproar and confusion after they had publicly stated in the past they would waive the restrictions.

That changed today and clarity was brought to the situation as BP said in a court filing they would indeed waive the liability cap.

Also per the filing, BP was generous with their advice for other major players in the Gulf spill, encouraging Transocean Holdings LLC (NYSE:RIG), Anadarko Petroleum Corp (NYSE:APC) and MOEX Offshore 2007 LLC to also waive the cap.

MOEX is the majority owner of Mitsui (Nasdaq:MITSY), which has a 10 percent stake in the Macondo oil well. Anadarko has a 25 percent stake and BP the remaining 65 percent. Transocean owned the Deepwater Horizon oil rig which was leased by BP from them.

Also in the filing BP stated it has reserved the right to go after reimbursement for money it has already paid from its partners. Much of that remains to be decided based on whether they are designated as being grossly negligent in the matter.

If they are, the other participants and owners probably won't have to pay damages to BP.

BP (NYSE:BP) Connects Performance Rewards to Safety

An internal email from BP (NYSE:BP) Chief Executive Officer Bob Dudley to
employees said bonuses and rewards in the 4th quarter will be based solely
upon safety results.

A spokesman for BP said the new plan will be in place for this quarter only while the company develops an overall policy to address the issue going forward.

Bob Dudley said in the email communication that the progress made by each business "in reducing operational risks and achieving excellent safety and
compliance standards," would be how workers would be rewarded.

The goal he said was to ""to ensure that a low-probability, high-impact
incident such as the Deepwater Horizon tragedy never happens again." The key to achieving that goal, he added, is "the rigorous identification and
management of every risk we face."

As far as existing reward contracts, those would be honored by BP for the first three quarters of 2010.

BP (NYSE:BP) Retains Head of Gulf Unit

In an interesting decision, BP (NYSE:BP) decided to keep its head of their Gulf of Mexico unit, James Dupree, in place, after more changes in its management team since the Deepwater Horizon disaster.

An internal company email revealed that the same wasn't true of the head of BP's North American natural gas business, Kent Wells, who was one of their key people in capping the oil well.

According to the email, Wells "led the strategic move into shale and the step change in personal safety performance."

Concerning Dupree, the company said in the email that "James Dupree is confirmed regional president, Gulf of Mexico." Although it's a different title than in the past, it's essentially the same position.

BP (NYSE:BP) Blowout Preventer Investigation Contracted to "Det Norske Veritas"

There is finally some movement on the investigation of the failed blowout preventer on the Deepwater Horizon oil rig operated by BP (NYSE:BP), and of which the blowout preventer was supplied by Cameron International (NYSE:CAM).

Norwegian foundation "Det Norske Veritas" was awarded the contract by the Joint Investigation Team which includes people from the Department of the Interior and Homeland Security.

The device has been sitting around for a month in storage by NASA in Michoud, Louisiana, as the federal government dragged its feet over the matter.

Even though it has taken a month to get it going, DNV will work on developing forensic testing protocols, consulting a number of government, commercial and academic organizations. Not having protocols was the reason given by the government as to why they hadn't gone forward yet. It took them a month to figure out who to choose to begin the process.

When protocols are in place, before testing begins on each one the the Joint Investigation Team will be have to give its approval.

“Chain of custody and evidence preservation protocols to ensure the proper handling of all evidentiary material have been in effect since the BOP was first retrieved in August,” said DNV.

The blowout preventer is the major piece of evidence in the oil spill accident, and determining what happened to it will decide a lot of how the liability will be passed around.

BP (NYSE:BP) Spill to Look at Future Of Offshore Drilling in U.S.

On Wednesday the BP (NYSE:BP) oil spill commission will meet to take a look at what the future of offshore drilling is for America.

At this time the commission in investigating various aspects of the accident leading to and the consequences of the explosion on the Deepwater Horizon oil rig.

Being a public discussion, sparks are sure to fly as the highly controversial and disastrous oil moratorium of the Obama administration has affected thousands of jobs in the Gulf region, and more through permitting standards in shallow water drilling that are increasingly costing the loss of more jobs.

The National Commission on the BP PLC Deepwater Horizon Oil Spill and Offshore Drilling say they'll also talk about the rules that decide the parameters of offshore drilling in the U.S.

BP (NYSE:BP) E-mails with Anadarko (NYSE:APC), MOEX, Could Determine Liability in Oil Spill

BP (NYSE:BP) said via offshore land negotiator Michael Beirne that e-mails between them and Macondo oil well partners Anadarko Petroleum Corp. (NYSE:APC) and MOEX 2007 LLC reveal they were receiving real-time data from the Deepwater Horizon oil rig in the days before the explosion which led to the oil spill in the Gulf of Mexico.

As proceedings go forward, that could be a significant part of determining financial liability for the companies.

So even while BP's costs continue to mount, eventually they could get some relief from their partners, who may have to reimburse them for billions.

The other scenario that could play out is if BP is determined to be grossly negligent in connection to the incident. In that case, their partners via the contract wouldn't be responsible for paying damages, and it could lead to many more billions in fines from the violation of the Clean Water Act.

If that isn't the case, then Anadarko and MOEX, through their majority owned Mitsui & Co (Nasdaq:MITSY), would have to pay their portion of the damages.

Mitsui and Anadarko carry almost the same market cap, so both could be hit hard from it, although Anadarko would be hit the hardest because of their 25 percent stake, as Mitsui only has a 10 percent stake in the well.

Transocean (NYSE:RIG) Bonds Surge After BP (NYSE:BP) Issue Generates Optimism

Transocean Ltd. bonds (NYSE:RIG) took off after the recent issuance by BP (NYSE:BP) engendered optimism in the oil companies connected to the oil spill in the Gulf of Mexico.

Trading on Transocean bonds was the highest in the U.S., which were valued at $900 million for the 6.5 percent securities, which are due in 2020.

BP issued $3.5 billion of bonds on September 28, which broke par since then, generating the interest in Transocean bonds, which were issued on September 16.

Transocean owned the Deepwater Horizon oil rig which went down, leasing it to BP.

BP (NYSE:BP) Shares Up on Management Changes, Safety Unit

BP (NYSE:BP) shares are in the positive Wednesday after incoming CEO Bob Dudley shook things up in management, firing Andy Inglis, who was responsible for deep water operations when the Deepwater Horizon oil well exploded.

Inglis will also be leaving the board of TNK-BP on October 31. Outgoing CEO Tony Hayward will sit on the board.

Heading up exploration and production, Inglis will be replaced by three executives after the E&P business is split into three different divisions.

There was also an announcement BP was creating a new safety division to oversee all aspects of the business. They are authorized to intervene in any activity being performed throughout the company.

BP shares are up today to $39.92, gaining $0.63, or 1.60 percent at 11:46 AM EDT.

Transocean (NYSE:RIG) Issue with Blowout Preventer Resolved with Government

A battle had been heating up between Transocean (NYSE:RIG) and other oil companies over the major piece of evidence in the Macondo oil well disaster.

The blowout preventer was the center of the dispute, where concerns over the proper care of it and the potential compromising of its condition were at issue.

For some reason the government said it wasn't going to flush seawater and other fluids out of the control pods. Transocean said if that wasn't done, corrosion could easily set in, causing problems which could lead to malfunction as a result.

To settle the issue, the government did a turnaround and said they'll flush the control pods on the blowout preventer to keep it from corroding before it's examined to see why it failed.

Judge Barbier consequently denied a motion by Transocean to compel the government to protect the device while it was the target of the investigation because of the problem being resolved.

ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP) and Shell Oil (NYSE:RDS-A) Ads Point to BP's (NYSE:BP) Failure

Although the name of BP (NYSE:BP) hasn't specifically been mentioned, competitors ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP) and Shell Oil (NYSE:RDS-A) have been putting ads in major newspapers, saying if wells were built and operated correctly in the first place, they wouldn't fail.

The headline of one of the ads say, “Engineer it. Build it. And make sure it is never needed.”

But in the fine print is where they make their key attack. It says, “While we don’t yet have all the facts regarding the incident in the Gulf of Mexico, we do know that such tragedies are avoidable. By starting with properly designed wells, by following established procedures and best practices, by conducting relentless inspections, tests and drills, and with frequent, thorough training of personnel, accidents like this should never happen.”

The four majors mentioned above are part of a partnership to build a rapid response system to limit the damage of an oil spill if it ever does happen again. They are together spending about $1 billion to develop it.

Other than those who had a direct stake or contractual connection to the Deepwater Horizon oil rig or Macondo oil well, this may be the first time others with no direct connection have entered into the public relations fray.

BP (NYSE:BP) Should Have Managed Transocean (NYSE:RIG), Halliburton (NYSE:HAL), and Weatherford (NYSE:WFT) Better Says Hayward

Among the numerous comments made before a hearing of British lawmakers, BP (NYSE:BP) outgoing CEO Tony Hayward said the company should have been more aggressive in managing contractors like Transocean (NYSE:RIG), Halliburton (NYSE:HAL), and Weatherford (NYSE:WFT).

According to FT, Hayward said, “What we have is a lack of rigour and a lack of oversight of contractors. The contractors here were world class and you might have thought they wouldn’t have needed that level of oversight, but it was clearly something that was found wanting.”

With few significant incidents in deepwater drilling over the last 20 years, Hayward added it left the industry unprepared to respond to a major accident like the one they experienced with the Deepwater Horizon, which had the added challenge at being at a depth of about 5,000 feet.

When asked about reported violations in the North Sea from the Financial Times, Hayward said the news outlet offered no revelation of any fundamental problems related to their operations there.

BP (NYSE:BP) Report Clearly About Avoiding "Gross Negligence"

There is no doubt the biggest concern of BP (NYSE:BP) is to be found "grossly negligent" concerning the oil spill in the Gulf of Mexico, which would add billions in fines to the company, on top of the billions already paid out, and the billions committed to in the future.

With that in mind, their report on the causes of the Deepwater Horizon accident definitely was a marketing piece, although it did deal with legitimate issues.

Any report will go through similar possibilities that BP went through, creating probabilities concerning other companies who had worked on, provided equipment for, or had a stake in the well.

The report really points to those possibilities, and in some cases, points directly to specific companies and their alleged failures.

BP did what it meant to in the report, which was to give believable testimony as to real causes, while at the same time spreading the fault around to others having a part in the oil rig and well.

Now the onus will be on future reports to refute BP's assertions, which is made harder by the majority of failures being directed to others.

It's made harder because every assertion by BP will now have to be proven false if it is to point back to them.

This is really their last shot. This report, and future investigative reports from others, will determine how BP is designated in the incident, and how liable other parties are.

It'll be difficult to place all the blame on BP from an evidence standpoint, now that they've pointed out these series of failures which led to the destruction of the oil well, loss of life, and spewing of oil into the Gulf of Mexico.

In a sense, this report rests their case, and now it's in the court of the rest of the participants and investigators to disprove what their findings were.

If BP can avoid being found in "gross negligence," they'll save billions, if others are found at fault, it'll spread the costs among them as well, saving even more billions. BP had nothing to lose, and this is one thing they did right, whether people like it or not.

BP's (NYSE:BP) Internal Report to be Released Wednesday

While it won't be the final word on the matter, the internal report from BP (NYSE:BP) which investigated the causes which led up to the explosion on the Deepwater Horizon oil rig, will be released Wednesday morning, and should give a preliminary look at what went wrong.

One major piece of the puzzle missing from the report is the blowout preventer, which is considered the key piece of evidence in what went wrong that day.

The failed blowout preventer was raised from the Gulf bottom during the weekend and FBI agents were on board the BP vessel 'Helix Q4000' to take charge of it.

There has been some concern from other companies with potential liability in the oil well, like Anadarko (NYSE:APC) and Cameron International (NYSE:CAM) on how the blowout preventer will be examined.

The Department of Justice, which now has control of the preventer, hasn't communicated how it's going to proceed with the investigation at this time.

FBI Swoops in on BP (NYSE:BP) Blowout Preventer

In anticipation of examining the failed blowout preventer on the Deepwater Horizon oil rig, the FBI was at the surface when the 5-story device was brought to the surface of the Gulf of Mexico, after being removed and replaced by a fully-functioning, new blowout preventer.

The original blowout preventer failed to do its job of keeping oil from being released into the waters of the Gulf, making it the primary piece of evidence for civil, and possibly, criminal charges in the near future.

It took almost 30 hours for engineers to lift the giant preventer from the bottom of the Gulf to the surface, which was a journey of about a mile. The device weighs in at 300 tons.

The huge device, which if fifty feet tall, will be moved to New Orleans to be stored and eventually examined.

Legal issues must be faced as some oil companies are challenging the U.S. government being the sole examiner of the rig.

Cameron International (NYSE:CAM) unsuccessfully attempted to keep the blowout preventer from being removed in order to take photos of the object to see if there had been any damage during the removal process. That was denied by a judge.

BP (NYSE:BP) Won't Resume Blowout Preventer Removal Till Friday at Earliest

Government point man Thad Allen said BP (NYSE:BP) won't be able to resume the effort to remove the blowout preventer until at the earliest: Friday. It's more likely it'll be later than that.

Large waves continue to hamper the salvage efforts, and until that changes, there's nothing the oil company will be allowed or able to do.

Allen added it could even be next week before work can start up again.

The blowout preventer is the key piece of equipment which should be able to shed light on what caused the explosion which killed 11 workers on the Deepwater Horizon oil rig in April.

BP's challenge is to remove it in a way where no damage could compromise the preventer, so a conclusion can be drawn concerning liability.

Missouri DNR Director Heading Up BP (NYSE:BP) Fund

Missouri Department of Natural Resources director Mark Templeton has stepped down from his position to take over the role of heading up the $20 billion BP (NYSE:BP) fund.

A statement from Missouri Governor Jay Nixon said he will be the executive director of the "Office of Independent Trustees of the Deepwater Horizon Oil Spill Trust."

The decision to hire Templeton was made by the trustees of the fund, and not BP, according to BP spokeswoman Jessie Baker.

This isn't to be confused with the role of Kenneth Feinberg, who is administrating the claims portion of the compensation fund, not the fund itself.

BP (NYSE:BP) Puts Gulf Operations on Hold Because of Weather

BP (NYSE:BP) announced its attempt to replace the blowout preventer by removing the sealing cap has been put on hold, as concerns over bad weather has halted the process.

On the company's website they said the high seas is the major factor, and until those conditions subside, they won't proceed with the operations. They will wait till the Gulf waves reach "acceptable levels" before continuing.

A couple of things are important with removing the blowout preventer. The first is to do it in a way where no damage is done to it because it's the key piece of evidence in finding out what caused the accident on the Deepwater Horizon oil rig.

And second, to put a new blowout preventer on the rig in order to prevent the "bottom kill" - which will be the final step in permanently plugging the well - from wrecking the cement plug which was put in place in August.