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keeps pumping out more big charges.

The giant energy services company, dogged by a problem contract and lingering asbestos exposure, announced Tuesday that second-quarter results will be saddled with nearly $1 billion in new pretax charges. The first charge, taken to cover rising costs and delays for a big project in Brazil, will reduce after-tax earnings by 46 cents a share. The second charge, related to asbestos litigation, will slash quarterly profits by more than three times as much.

Still, Halliburton dwelled on the smaller charge -- caused by mounting problems with its Barracuda-Caratinga pipeline construction in Brazil -- as the more troubling one.

"The Barracuda-Caratinga charge was not anticipated and is disappointing," acknowledged Halliburton CEO Dave Lesar. But "despite these charges, we are getting closer to having both our asbestos liability and the Barracuda-Caratinga project behind us."

Halliburton investors -- by now accustomed to such charges -- felt less than reassured. They pushed the company's stock down 1.8% to $29.95 early Tuesday morning.

Halliburton blamed the Barracuda-Caratinga charge on a "significant reduction in shipyard subcontractor productivity" in Brazil and poor integration of equipment. The company says that project delays will now extend the completion date into periods when "liquidated damages would be incurred." Halliburton is already in the process of trying to resolve other outstanding issues associated with the contract.

Meanwhile, the company's asbestos costs continue to increase. The company said on Tuesday that it must take a $615 million after-tax charge to lower the receivables it expects from asbestos insurance coverage. The company has been trying for years to put its asbestos exposure behind it -- partly by bankrupting affected business units -- and move forward without that lingering weight.

"These insurance settlements, if consummated, will resolve disputes between us and our carriers, forestall further appeals and allow the bankruptcy proceedings to be completed expeditiously," Lesar said. "I am pleased with the progress made on the agreements."

Elsewhere in the energy sector, El Paso investors were looking -- but not necessarily finding -- a reason to celebrate. Tuesday brought a long-awaited plan for the company's struggling production division. However, the company's stock -- which opened flat -- began to fall slightly, dropping a nickel to $7.60 a share, as New Production President Lisa Stewart reviewed the strategy in more detail.

El Paso Production is now relying on a "back-to-basics" plan to restore a once-strong business hurt by performance shortfalls and a stunning reduction in proved reserves.

Stewart identified a number of key components in her strategy. First, she said, the production company will exercise "strict capital discipline" and continue to closely evaluate its past investment decisions. Second, she said, the company will constantly monitor its base production business and dispose of underperforming assets. Third, she said, the company will maintain its focus on cost control even after a 17% reduction in its workforce.

Stewart also said that El Paso will employ a "rigorous process" for booking reserves -- hiring an outside expert to compile year-end results -- after this year's deep writedown. In addition, she indicated that employees will be held accountable for their region's performance and, when appropriate, also rewarded accordingly.

"By following strict capital and risk discipline and focusing on our base operations, this business will turn the corner in 2004," Stewart pledged. "I am confident that our employees will deliver on this plan and restore this business to sustainable and consistent growth."

But El Paso has already lowered its expectations. The company is now projecting average production volumes of 825 million to 875 million cubic feet of equivalent per day for both this year and next. The company had previously forecast production targets of 850 million to 950 million cubic feet of equivalent just last month.

Still, some analysts had already viewed El Paso's outlook as optimistic.

"Given a reduced CAPX budget for E&P -- down 40% in 1Q04 and estimated to be about 50% of 2003 budget, we find it difficult to believe the EP will meet its stated 850-950 mmcfe/day average production target," Prudential analyst Carol Coale wrote early this month in one of her final reports before resigning from the firm.

Coale went on to say that El Paso could rely on acquisitions in part to improve its production business. And the company has already started to do just that. After shedding billions of dollars worth of assets in an attempt to reduce its debt load, El Paso suddenly announced this week that it plans to buy an asset instead. Specifically, El Paso is offering



$61 million -- and up to $19 million in additional payments -- so that it can become the sole owner of some Brazilian production assets. El Paso already owns the other half of the properties.

Stewart celebrated the move on Monday.

"In addition to expanding our reserve base and increasing our production, the UnoPaso acquisition solidifies our position in Brazil and provides us with substantial future drilling opportunities," she stated. "Strategic acquisitions such as this one are a key step in our plan to turn around El Paso's production business."

For now, analysts remain lukewarm on the stock -- most with neutral ratings -- as they wait for stronger signs of progress.