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Global Credit Research - 13 Feb 2012
New York, February 13, 2012 -- Recent court rulings that BP plc must indemnify Transocean and Halliburton
for compensatory damages stemming from the devastating 2010 Macondo oil
spill in the Gulf of Mexico—but offering no protection from any
civil fines and penalties under the Clean Water Act and punitive damages
that arise—appear credit-negative for Transocean, but
slightly credit-positive for Halliburton, Moody's Investors
Service says in a new special comment.
Transocean's Deepwater Horizon oil rig, working on BP's
Macondo Prospect in the Gulf of Mexico, exploded in April 2010,
killing 11 workers and setting off a leak that spilled an estimated 4.1
million barrels of oil into the Gulf according to a report commissioned
by the US Department of the Interior. Halliburton had provided
the rig with data acquisition and well-cementing services—part
of the process designed to control high-pressure well conditions
and prevent leaks.
"In our view, the recent rulings greatly reduced the potential
for Transocean and Halliburton to share in the cost of third-party
compensatory claims," says Stuart Miller, a Moody's
Vice President -- Senior Analyst and author of the report.
"From a credit standpoint, this has a greater positive impact
on Halliburton than on Transocean as we believe compensatory claims represented
a larger proportion of Halliburton's potential exposure."
Halliburton remains at risk to some level of civil fines and penalties
and possibly punitive damages, but to a lesser degree than Transocean
as the owner and operator of the Deepwater Horizon. The report
notes that the US Department of Justice (DOJ) has not named Halliburton
as a Responsible Party in its proceedings. The new rulings apparently
leave the two companies exposed to possible punitive damages if the court
agrees with DOJ's assertion that the companies acted with gross
negligence that led to the Macondo accident.
"Ultimately, the court will rule on the financial responsibility
for what could be more than $40 billion in liabilities that resulted
from the Macondo incident," added Miller. "Barring
out-of-court settlements, these recent district court
rulings mark just the beginning of a long court battle unlikely to be
completed before 2013, and after appeals may take years to fully
resolve. But for now, the rulings hint at modestly reduced
financial risk for Halliburton and slightly higher financial risk for
For more information please see the full report, "Initial
Macondo Summary Judgments Offer Split Decision," on www.moodys.com.
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Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
MD - Corporate Finance
Corporate Finance Group
Moody's: Gulf of Mexico Court Rulings Limit BP's Indemnity for Transocean and Halliburton
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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