Halliburton Co. has reached a settlement in U.S. District Court in New Orleans to pay $1.1 billion to resolve most of the claims against it arising from the Deepwater Horizon oil spill in the Gulf of Mexico in a deal the company says could save it billions in future claims.
The settlement, announced Sept. 2, must be approved by a federal court. The money, from a $1.3 billion fund that Halliburton had set aside for costs related to the spill, will be held in escrow until all appeals are exhausted, then will be paid out in three installments.
The Deepwater Horizon oil rig off the Louisiana coast was drilling for oil at the Macondo oil field on April 20, 2010 when it blew up, killing 11 workers. It spilled 4.9 million barrels of crude oil into the Gulf of Mexico, according to U.S. government estimates.
Other defendants in the case are BP of Britain, which owned the rights to the Macondo oil field and has paid out about $28 billion to date, and rig contractor Transocean Ltd., which will pay out $1.4 billion.
Halliburton, an oilfield services company, was responsible for cementing services for the drilling operation. It has been accused of doing a shoddy job, but Halliburton says it was merely following BP’s instructions.
The $1.1 billion settlement is far less than Halliburton might have paid if it continued to resist a settlement. Now, it says, the agreement disposes of “a substantial majority” of its liability in the Deepwater Horizon disaster.
The decision eliminates much of the uncertainty that Halliburton has faced since the spill as investors awaited the outcome of the court action. Now that the settlement is less than what Halliburton had set aside for potential costs, investors see the settlement as a “non event,” Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, told Bloomberg Business Week.
U.S. District Judge Carl Barbier, who is overseeing the case, is expected to rule soon on how much blame each company carries for the disaster. A decision that Halliburton was guilty of fraud and gross negligence would have left it liable to billions of dollars in punitive and compensatory damages.
The settlement avoids that by resolving both punitive and compensatory liability in most lawsuits from private plaintiffs and local governments, though Halliburton still faces claims from Louisiana and Alabama, and compensatory damages from some claims by private parties.
Not only are Halliburton’s investors pleased by the settlement, so are the plaintiffs’ lawyers. Stephen J. Herman and James P. Roy, the co-lead attorneys, issued a statement saying, “Halliburton stepped up to the plate and agreed to provide a fair measure of compensation to people and businesses harmed in the wake of the Deepwater Horizon tragedy.”
By Andy Tully of Oilprice.com