Canaccord Genuity Morning Coffee on Halliburton (HAL) and Transocean (RIG): Blowout...Not Just A Hairstyle
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Price: $35.69 +1.91%
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Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
34 Buy, 17 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Canaccord Genuity Morning Coffee on Halliburton (NYSE: HAL) and Transocean (NYSE: RIG): Blowout...Not Just A Hairstyle
A federal judge upheld Transocean's indemnity for most spill claims from the Macondo blowout, specifically that the company is not liable for damage claims by third parties for oil that originated below the water line, meaning that it would be liable only for the 18,000 bbls of diesel fuel that spilled when the rig burned and sank. However, Transocean is not indemnified from punitive damages or civil penalties brought by the U.S. government, though Canaccord Genuity Energy Analyst Scott Burk assumes those are confirmed as only being related to diesel spilled from the Deepwater Horizon rig. Also, BP (NYSE: BP) is not responsible for paying Transocean's legal fees in proving its right to indemnity. Burk says this is a huge win for Transocean, as BP was trying to overturn the indemnity in the drilling contract and force Transocean to pay for some portion or all of the liability associated with the spill clean-up and Clean Water Act fines that will total $20-40 billion. He believes Transocean's potential liability from this blowout is now confirmed at millions to hundreds of millions of dollars, instead of billions. His estimates don't change on the news since he didn't include any liability from this lawsuit. Beyond Transocean, Burk sees this as being a huge win for the industry because it confirms that the standard indemnity clause in drilling and service contracts continues to be legally valid. If the judge comes out with a similar ruling in BP's suit against Halliburton, he believes Halliburton’s potential liabilities from the spill would be even less than Transocean's, as Halliburton didn't even have any diesel spill into the ocean. In Burk’s view, Halliburton's liabilities should be zero based on their indemnity clause and BP's oversight of the Macondo well, including the cementing performed by Halliburton.
A federal judge upheld Transocean's indemnity for most spill claims from the Macondo blowout, specifically that the company is not liable for damage claims by third parties for oil that originated below the water line, meaning that it would be liable only for the 18,000 bbls of diesel fuel that spilled when the rig burned and sank. However, Transocean is not indemnified from punitive damages or civil penalties brought by the U.S. government, though Canaccord Genuity Energy Analyst Scott Burk assumes those are confirmed as only being related to diesel spilled from the Deepwater Horizon rig. Also, BP (NYSE: BP) is not responsible for paying Transocean's legal fees in proving its right to indemnity. Burk says this is a huge win for Transocean, as BP was trying to overturn the indemnity in the drilling contract and force Transocean to pay for some portion or all of the liability associated with the spill clean-up and Clean Water Act fines that will total $20-40 billion. He believes Transocean's potential liability from this blowout is now confirmed at millions to hundreds of millions of dollars, instead of billions. His estimates don't change on the news since he didn't include any liability from this lawsuit. Beyond Transocean, Burk sees this as being a huge win for the industry because it confirms that the standard indemnity clause in drilling and service contracts continues to be legally valid. If the judge comes out with a similar ruling in BP's suit against Halliburton, he believes Halliburton’s potential liabilities from the spill would be even less than Transocean's, as Halliburton didn't even have any diesel spill into the ocean. In Burk’s view, Halliburton's liabilities should be zero based on their indemnity clause and BP's oversight of the Macondo well, including the cementing performed by Halliburton.
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