Halliburton 2011 Annual Report Download - page 111

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BP Exploration, in connection with filing its claims with respect to the MDL proceeding, asked
that court to declare that it is not liable to us in contribution, indemnification, or otherwise with respect to
liabilities arising from the Macondo well incident. Other defendants in the litigation discussed above have
generally denied any obligation to contribute to any liabilities arising from the Macondo well incident.
In January 2012, the court in the MDL proceeding entered an order in response to our and BP’ s
motions for summary judgment regarding certain indemnification matters. The court held that BP is
required to indemnify us for third-party compensatory claims, or actual damages, that arise from pollution
or contamination that did not originate from our property or equipment located above the surface of the
land or water, even if we are found to be grossly negligent. The court did not express an opinion as to
whether our conduct amounted to gross negligence, but we do not believe the performance of our services
on the Deepwater Horizon constituted gross negligence. The court also held, however, that BP does not
owe us indemnity for punitive damages or for civil penalties under the CWA, if any, and that fraud could
void the indemnity on public policy grounds, although the court stated that it was mindful that mere failure
to perform contractual obligations as promised does not constitute fraud. As discussed above, the DOJ is
not seeking civil penalties from us under the CWA. The court in the MDL proceeding deferred ruling on
whether our indemnification from BP covers penalties or fines under the OCSLA, whether our alleged
breach of our contract with BP Exploration would invalidate the indemnity, and whether we committed an
act that materially increased the risk to or prejudiced the rights of BP so as to invalidate the indemnity. We
do not believe that we breached our contract with BP Exploration or committed an act that would otherwise
invalidate the indemnity. The court’ s rulings will be subject to appeal at the appropriate time.
In responding to similar motions for summary judgment between Transocean and BP, the court
also held that public policy would not bar Transocean’ s claim for indemnification of compensatory
damages, even if Transocean was found to be grossly negligent. The court also held, among other things,
that Transocean’ s contractual right to indemnity does not extend to punitive damages or civil penalties
under the CWA.
The rulings in the MDL proceeding regarding the indemnities are based on maritime law and may
not bind the determination of similar issues in lawsuits not comprising a part of the MDL proceedings.
Accordingly it is possible that different conclusions with respect to indemnities will be reached by other
courts.
Indemnification for criminal fines or penalties, if any, may not be available if a court were to find
such indemnification unenforceable as against public policy. In addition, certain state laws, if deemed to
apply, would not allow for enforcement of indemnification for gross negligence, and may not allow for
enforcement of indemnification of persons who are found to be negligent with respect to personal injury
claims.
Financial analysts and the press have speculated about the financial capacity of BP, and whether it
might seek to avoid indemnification obligations in bankruptcy proceedings. BP’ s public filings indicate that
BP has recognized in excess of $40 billion in pre-tax charges, excluding offsets for settlement payments
received from certain defendants in the proceedings described above under “Litigation,” as a result of the
Macondo well incident. BP’ s public filings also indicate that the amount of, among other things, certain
natural resource damages with respect to certain OPA claims, some of which may be included in such
charges, cannot be reliably estimated as of the dates of those filings. We consider, however, the likelihood
of a BP bankruptcy to be remote.