Halliburton 2011 Annual Report Download - page 25

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10
Our contract with BP Exploration relating to the Macondo well generally provides for our
indemnification for certain potential claims and expenses relating to the Macondo well incident. BP
Exploration, in connection with filing its claims with respect to the MDL proceeding, sought to avoid their
indemnity obligations and asked the 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 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 also held that BP does not owe
us indemnity for punitive damages or for civil penalties under the Clean Water Act (CWA), if any, and that
fraud could void the indemnity on public policy grounds. The court in the MDL proceeding deferred ruling
on whether our indemnification from BP covers penalties or fines under the Outer Continental Shelf Lands
Act, 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.
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 MDL, 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. If BP Exploration filed for bankruptcy protection, a bankruptcy judge could disallow
our contract with BP Exploration, including the indemnification obligations thereunder. Also, we may not
be insured with respect to civil or criminal fines or penalties, if any, pursuant to the terms of our insurance
policies.
We are currently unable to estimate the impact the Macondo well incident will have on us. We
cannot predict the outcome of the many lawsuits and investigations relating to the Macondo well incident,
including whether the MDL will proceed to trial, the results of any such trial, or whether we might settle
with one or more of the parties to any lawsuit or investigation. Given the numerous potential future
developments relating to the MDL and other lawsuits and investigations, we are unable to conclude
whether we will incur a loss. As of December 31, 2011, we have not accrued any amounts related to this
matter because we have not determined that a loss is probable and a reasonable estimate of a loss or range
of loss related to this matter cannot be made. As a result of any future developments, some of which could
occur as soon as within the next few months, we may adjust our liability assessment, and liabilities arising
out of this matter could have a material adverse effect on our liquidity, consolidated results of operations,
and consolidated financial condition.