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The 5 Dumbest Things on Wall Street: Oct. 29

(5 Dumbest article updated with Halliburton's response to the presidential commission findings on its cement.)
5. Halliburton Cement Lacking in Cement-like Qualities

When someone blows a recipe, we hope it's for something mundane like cookies or pumpkin pie, not cement intended for use on deep water oil rigs.

Leave it to Halliburton (HAL) to not only mess up that recipe, but to spend months denying any culpability for the role its cement played in the BP (BP) oil spill. Halliburton's party line up to this point has been that their cement job was juuuust right, and that BP's inferior rig design was to blame for one of the worst environmental catastrophes in U.S. history.

According to a report issued on Thursday from the presidential commission investigating the disaster, three of four tests Halliburton conducted on the cement prior to the rig explosion showed it to be unstable. Two of those four cement recipes were identical to those Halliburton used for BP's Macondo well. The one set of test results that did show stable cement may not have even been available at the time of the work on the Macondo well.

Did Halliburton bother to sound the alarm as a result? Not exactly, said the commission. Halliburton appears to have communicated the cement test results, but didn't really do so in a way that would have, oh, maybe drawn some serious attention to the matter. Go figure.

Unfortunately for BP, the latest revelation in this mess by no means gets BP off the hook. Maybe former CEO Tony Hayward is getting some hollow satisfaction that his seemingly childish whines about Halliburton's "bad cement job" -- which he made repeatedly following the explosion and in the company's interim report -- have been proven to have some validity. The report even says that proper cement stability should have prevented the deepwater well blowout. That said, the commission also found that there were likely several causes of the explosion and that BP's full knowledge of the cement problems still isn't entirely known.


Halliburton responded early on Thursday by posting a copy of its contract with BP. One portion of the contract makes clear that the onus was on Halliburton to communicate to BP any deficiencies in its work, but the onus then turned to BP to request any work modifications, after which Halliburton would no longer be held liable.

The company followed up at almost 11 p.m. on Thursday with a more formal rebuttal. "Halliburton believes that significant differences between its internal cement tests and the Commission's test results may be due to differences in the cement materials tested," reads the Halliburton statement. "The Commission tested off-the-shelf cement and additives, whereas Halliburton tested the unique blend of cement and additives that existed on the rig at the time Halliburton's tests were conducted."

Ultimately, and not surprisingly, Halliburton made sure to point the finger back at BP. "Halliburton believes that had BP conducted a cement bond log test, or had BP and others properly interpreted a negative-pressure test, these tests would have revealed any problems with Halliburton's cement. A cement bond log test is the only means available to evaluate the integrity of the cement bond. BP, as the well owner and operator, decided not to run a cement bond log test even though the appropriate personnel and equipment were on the rig and available to run that test. BP personnel have publicly testified they intended to conduct the cement bond log test at a later date and to perform any necessary remedial work at that time."

So, the takeaway here is that Halliburton can sell you shoddy cement but will make damn sure they've covered themselves legally for doing so. Yay, ethics! The end result doesn't change much. More layers of the tar ball that is the BP oil spill are being revealed. As you'd expect, each exposed layer only gets blacker and stickier.

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