Halliburton Co is in talks to settle private claims against it in a trial to determine how to allocate blame for the 2010 Gulf of Mexico spill, the oilfield services company said on Monday, as it took a $1 billion pretax charge for a possible deal. Disclosure of the "court-facilitated" talks helped push Halliburton shares up more than 3 percent, even though the charge pushed the company to a first-quarter loss.
The news came just days after the conclusion of court proceedings for the first phase of the trial over claims brought by the US government and Gulf Coast states, as well as private parties affected by the worst US offshore oil spill. While Halliburton is not the subject of direct government actions, BP Plc has tried to hold the company and rig owner Transocean Ltd partly responsible for damages. Halliburton did the cement work on the Macondo well, which spilled more than 4 million barrels of oil.
A BP spokesman would not comment on whether the talks extended beyond Halliburton. Halliburton Chief Executive Officer David Lesar said the company believed an "early and reasonably valued" resolution was in the best interests of shareholders, and its most recent offer included cash components payable over time as well as stock. "Discussions are at an advanced stage but have not yet resulted in a settlement," Lesar said, explaining what amounts to an after-tax charge of $637 million that pushed the company to a loss for the first quarter.
The charge is based on where Halliburton is in the negotiations, Lesar said. It is on top of a first-quarter 2012 charge of $191 million after taxes, or $300 million before taxes. The total $1.3 billion reserve estimate does not include any potential insurance recovery. Chief Financial Officer Mark McCollum told analysts that the reserve may be revised up or down, but the executives declined to take further questions about the possible settlement or trial on the conference call.
Shares of Halliburton, the world's second-largest oilfield services company, rose 3.2 percent to $38.39 in morning trading. "A Macondo settlement would be a significant positive for the stock," said UBS analyst Angie Sedita, adding that Halliburton also got a lift in the first quarter from higher-than-expected earnings in North America. The company reported a loss of $13 million, or 1 cent per share, compared with year-earlier earnings of $635 million, or 69 cents per share.
Excluding the charge and other items, it made a profit of 62 cents per share, ahead of the 57 cents that analysts expected, according to Thomson Reuters I/B/E/S. Revenue rose 1.5 percent to $6.97 billion. Revenue from outside North America grew 21 percent, and Halliburton said it had delivered better growth internationally than its two primary competitors over the past four quarters.
On Friday, industry leader Schlumberger Ltd and third-ranked Baker Hughes Inc both reported higher-than-expected earnings. Oilfield companies' pricing power, especially for pressure pumping fleets used in hydraulic fracturing, has collapsed in North America as the number of US rigs targeting natural gas edges away from a 14-year low. But Baker Hughes said on Friday that the declines in frack pricing were starting to taper off.
Halliburton weighed in on Monday, saying pricing in general might increase this year as customers adopt new technology to improve well production and the "intensity" of services provided per well increases, even as the rig count rises only modestly. "We believe the worst of the pricing pressure is behind us," said Chief Operating Officer Jeff Miller.