Shares of Halliburton (NYSE:HAL) plunged nearly 15% on Thursday after test results released about the Halliburton cement used in BP’s (NYSE:BP) Macondo well in the Gulf of Mexico showed signs of instability and the cement may have acted as a contributing factor to the April 20 explosion that led to the largest maritime oil spill in U.S. history.
The test results were laid out in a letter sent by government researchers to the White House's commission investigating the BP oil spill. If backed up with additional evidence, the government tests would bolster BP’s claims the cement in the Macondo well was a contributing factor to Deepwater Horizon's blow-out.
The commission conducted tests on Halliburton's cement mixtures with the help of facilities, equipment and researchers provided by Chevron (NYSE:CVX). In its tests, Chevron said "its lab personnel were unable to generate stable foam cement in the laboratory using the materials provided by Halliburton and available design information regarding the slurry used at the Macondo well."
It also appears that Halliburton was possibly aware that the cement it was providing to BP was not adequate. According to the letter, Halliburton conducted four of its own foam-stability tests on slurry mixtures for the well before the explosion. The first two tests done in February used a slightly different cement recipe than the one used in the BP well, while the two tests in April used the actual cement recipe that went into the BP well.
Only one of Halliburton's four tests - one of the tests done in April - showed the cement mixture would be stable, the letter said.
It also appears that Halliburton did not expressedly BP about the test results, according to the commission's letter. BP potentially could have pumped the Macondo well with Halliburton’s instable cement mixture without knowing if that cement was stable or not.
“Although laboratory foam stability tests cannot replicate field conditions perfectly, these data strongly suggest that the foam cement used at Macondo was unstable," according a letter sent to the commission. "This may have contributed to the blowout."
BP has long claimed that its partners with the Deep Water Horizon – Transocean (NYSE:RIG) and Halliburton - were negligent in their responsibilities in the well and should be held partially responsible. In September when BP released the results of its own internal investigation, BP said that the well’s cement wall did not hold.
If proven, those claims would run counter to Halliburton’s claims that the cement mixture it provided to BP was stable and not a contributing factor the April 20 explosion.
Any damaging data about Halliburton's cement do not relieve BP or Transocean of their responsibilities, the commission said. According to the letter, cement mixtures can fail pretty regularly and the industry has developed several tests to check whether a cement mixture has taken hold. Those tests such as the "negative-pressure test" were done by BP staff.
Further Halliburton provided to BP in March test data regarding the cement containing the results of the February test in it. The letter said that BP did not express any concerns about the cement at that time.
Shares of BP rose 2% on the news, possibly on a bet that Halliburton may have to shoulder some financial responsibility, while Halliburton shares dropped 14% on heavy volume to $31.23 a share.