Halliburton 2013 Annual Report Download - page 22

6
Our contract with BP Exploration relating to the Macondo well generally provides for our indemnification by BP
Exploration 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, 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 proceeding. 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. We may not be insured with respect to civil or criminal fines or penalties, if any,
pursuant to the terms of our insurance policies.
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.
We are currently unable to fully 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 orders and rulings of the court
that impact the MDL, the results of the MDL trial, the effect that the settlements between BP and the Plaintiffs’ Steering
Committee (PSC) in the MDL and other settlements may have on claims against us, or whether we might settle with one or more
of the parties to any lawsuit or investigation. The first two phases of the MDL trial have concluded, and the MDL court could
begin issuing rulings at any time. A determination that the performance of our services on the Deepwater Horizon constituted
gross negligence could result in substantial liability to the numerous plaintiffs for punitive damages and potentially to BP with
respect to its direct claims against us.
As of December 31, 2013, our loss contingency reserve for the Macondo well incident, relating to the MDL, remained
at $1.3 billion, which represents a loss contingency that is probable and for which a reasonable estimate of loss can be made. We
have participated in intermittent discussions with the PSC regarding the potential for a settlement that would resolve a substantial
portion of the claims pending in the MDL trial. BP, however, has not participated in any recent settlement discussions with us.
Reaching a settlement involves a complex process, and there can be no assurance as to whether or when we may
complete a settlement. In addition, the settlement discussions we have had to date do not cover all parties and claims relating to
the Macondo well incident. Accordingly, there are additional loss contingencies relating to the Macondo well incident that are
reasonably possible but for which we cannot make a reasonable estimate. Given the numerous potential developments relating to
the MDL and other lawsuits and investigations, which could occur at any time, we may adjust our estimated loss contingency
reserve in the future. Liabilities arising out of the Macondo well incident could have a material adverse effect on our liquidity,
consolidated results of operations, and consolidated financial condition.