Investigator Spills the Beans

Jim Brown
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Fred Bartlit provided another nail for the BP coffin this week when he sent a letter to the commission exploring the Horizon disaster. It does not paint a pretty picture for BP's future.

Halliburton knew of potential problems with the cement used in the Macondo well and it had informed BP well before the accident. A letter from Fred Bartlit to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (glad I don't have to answer that phone all day) said that tests in February on the cement slurry similar to the cement used on the Horizon well demonstrated instability. Bartlit is the lead investigator into the disaster.

According to Bartlit both companies had the data in March showing problems with the cement mixture. The foam slurry design was similar to the one used on the Horizon and would be unstable according to the tests. Neither company acted on the data.

Halliburton again tested the cement in early April and again found the mixture to be too unstable. The results of this test were distributed on April 17th three days before the disaster.

It is unbelievable to me that two companies of this size, fully aware of the potential liability in the event of a blowout would continue down the path to disaster as though nothing was wrong.

Bartlit said Halliburton and BP should have considered redesigning the contents of the slurry before pumping it into the Macondo well. The cementing operation was done on April 19th and 20th and late at night on the 20th is when the rig exploded.

U.S. Rep Edward Markey (D-MA) said "the fact BP and Halliburton knew this cement job could fail only solidifies their liability and responsibility for this disaster. This is like building a car when you know the brakes could fail but you sell the cars anyway." Markey called for the oil spill commission to get full subpoena power and for BP CEO Bob Dudley to agree to testify before Congress.

In BP's September report they admitted "weakness in cement design and testing, quality assurance and risk assessment" contributed to the explosion but put the blame fully on Halliburton. Halliburton responded saying the BP report was full of omissions and inaccuracies. I guess one of those would be BP NOT saying that they knew of these problems two months before the cement job.

Chevron also conducted independent tests of the nitrogen foam cement slurry used in the well and supplied by Halliburton and found the mix to be too unstable.

Bartlit emphasized in the letter to the commission that cementing failures are a "known hazard" in the industry. He stresse that specific tests such as "negative pressure test" and "cement evaluation logs" were designed to identify cementing problems. BP either failed to perform the test or in the case of the pressure test ignored the seriously critical readings as being so far out of the normal range that they must have been in error.

The BP relief well drilled into the annulus of the Macondo well and found no oil there. That further suggests that there was a failure of cement in another section of the well.

Bartlit's conclusions were that the cement failed to isolate the casing from the hydrocarbons causing a catastrophic failure when the drilling mud was removed.

A commission hearing is scheduled for Nov 9th but Bartlit felt the information needed to be disseminated immediately to the commission in order to "facilitate your consideration of their implications for offshore drilling safety."

The release of the letter at 1:PM caused HAL stock to decline by more than 10% intraday since blame shifted more towards Halliburton than RIG and CAM. RIG spiked on the news but gave back its gains before the close.

It is my unprofessional opinion that HAL's stock could be fitted for some cement shoes once the commission starts publishing their conclusions. HAL would be seriously hurt by having to share BP's estimated $35 billion liability. From the way it is going they might actually have the lions share of that liability. The offset is an indemnification clause in the contract where BP assumes their liability for anything relating to the well. Time will tell if that clause is proven legally binding.

Jim Brown

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