Halliburton Co is in "advanced" talks to settle private claims against it in a trial to determine blame for the 2010 Gulf of Mexico spill, the oilfield services company said on Monday, as it booked a $1 billion pretax charge for a possible deal.
Disclosure of the "court-facilitated" talks in the last month, which some legal experts tracking the BP trial linked to a series of missteps with evidence presented by Halliburton lawyers in the courtroom, helped push its shares up nearly 6 percent.
The news came only days after the end of court proceedings for the first phase of the trial over claims brought by the U.S. government, Gulf Coast states, and private parties affected by the worst U.S. offshore oil spill. The second phase, due to start in September, will address exactly how much oil spilled.
While Halliburton is not the subject of direct federal government actions, BP Plc has tried to hold Halliburton and rig owner Transocean Ltd partly responsible for damages in the case.
Even with a private claims settlement, the exact scope of Halliburton's liability will be unclear until the conclusion of the multi-district litigation consolidated under Judge Carl Barbier in New Orleans.
Halliburton carried out the cement work on the Macondo well, which spilled more than 4 million barrels of oil after the blowout which destroyed the Deepwater Horizon rig and killed 11 workers.
"Over the past month or so, we have participated in court facilitated settlement discussions with some of the parties included in the multi-district litigation, with a goal of resolving a substantial portion of the private claims against us in this matter," Chief Financial Officer Mark McCollum told analysts on a conference call.
The company was not immediately available to comment further.
Halliburton had a rough time at the trial over the past month. First, it belatedly introduced cement samples into evidence. Then the company's lawyers produced documents late and prompted Judge Barbier to say he found their handling of the matter "troubling," with a threat of sanctions.
Legal experts following the case, speaking privately, said the developments only added to the urgency of a settlement deal.
Halliburton 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, Chief Executive David Lesar said.
"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, which 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 $1.3 billion reserve does not include any potential insurance recovery. McCollum told the analysts the reserve may be revised up or down, but executives declined to take further questions about the possible settlement or trial on the call.
'A SIGNIFICANT POSITIVE'
Shares of Halliburton, the world's second-largest oilfield services company, rose 5.6 percent to $39.29 on Monday.
"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 first-quarter 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 analysts expected, according to Thomson Reuters I/B/E/S.
Revenue rose 1.5 percent to $6.97 billion.
Revenue outside North America grew 21 percent, and Halliburton said it had delivered better growth internationally than its two rivals over the past year. On Friday, sector leader Schlumberger Ltd and third-ranked Baker Hughes Inc posted higher-than-expected earnings.
Oilfield companies' pricing power, especially for equipment used in hydraulic fracturing, has collapsed in North America as the number of U.S. rigs targeting natural gas edges away from a 14-year low. But Baker Hughes said on Friday that the declines in fracking equipment rates 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.
(Reporting by Braden Reddall in San Francisco; Editing by Lisa Von Ahn and Sofina Mirza-Reid)