NEW YORK — Florida real estate developer St. Joe Co. is suing Halliburton Co. over its role in the rig explosion that led to the massive oil spill in the Gulf of Mexico.
St. Joe said this week that Halliburton, which was responsible for encasing BP's subsea well in cement, ignored safety procedures and didn't properly manage the cementing process. In deepwater drilling, cementing is a critical element in preventing oil and gas from escaping from the well.
"As a result, the cementing failed, allowing oil and gas to escape the well which caused the catastrophic blowout," St. Joe said. The cause of the blowout has not yet officially been determined. Multiple investigations are ongoing.
Hundreds of lawsuits have been filed against Halliburton, operator BP PLC, and the rig's owner, Transocean. St. Joe went after Halliburton first because it was thought to be the quickest way to collect damages and repay shareholders, said William Brewer, a partner at Bickel & Brewer and lead counsel for St. Joe. The company plans to file suit against the other companies involved as well.
St. Joe has a huge stake in the livelihood of the Gulf Coast. The company is the Florida panhandle's largest private landowner, with 70 percent of its 577,000 acres within 15 miles of the coast. A month after the spill, a commercial airport opened on land St. Joe donated. The company courted Southwest Airlines and Delta Air Lines to fly there. St. Joe is responsible for Southwest's fuel bill if it doesn't reach a certain number of passengers in its first two years.
Since the rig explosion in April, St. Joe says the value of its properties has declined substantially. Its stock has lost 23 percent since the April 20 incident; at one point it had dropped 40 percent. At its worst point, the company lost about $1.4 billion in market capitalization.
Halliburton, based in Houston, said in a statement that "allegations in this lawsuit appear to be without merit and we will vigorously contest it in court." It has said previously that it followed accepted industry practice in cementing the well.
BP - the well's operator - made most decisions on the rig. Documents released by the House Energy and Commerce Committee in June show that BP apparently rejected Halliburton's advice in preparing for the cementing job to close up the well. BP rejected Halliburton's recommendation to use 21 "centralizers" to make sure the casing ran down the center of the well bore. Instead, BP opted to use six centralizers.
St. Joe filed the suit late Wednesday in Delaware Superior Court.
Early Thursday, St. Joe posted a second-quarter loss of $8.6 million, or 9 cents per share, compared with a loss of $44.8 million, or 49 cents per share, a year earlier. The smaller loss reflected much lower expenses. The company didn't have to reimburse Southwest in the second quarter.
Revenue fell to $22 million from $39.1 million a year ago, due to a steep decline in property sales.
Photo: Aaron M. Sprecher/Bloomberg
In the past two days, two major drilling contractors in the Gulf of Mexico have released their third-quarter earnings, which gives us the best snapshot yet of the financial impact from the summer’s drilling moratorium.
Revenue for Noble Corp., which had six rigs idled by the drilling ban, fell by $146 million in the Gulf, company officials told analysts in a conference call today. Noble’s earnings plunged to $86 million from $426 million for the same quarter last year.
Things aren’t looking any better for Diamond Offshore, which moved two rigs out of the Gulf during the ban. Diamond’s revenue fell 12 percent from a year earlier, to $799.7 million and its profit fell by almost half, to $198.5 million from $364.1 million.
Companies like Noble and Diamond have managed to avoid layoffs by negotiating lower “suspension” rates with customers that keep their rigs staffed while they’re idle. Many other service companies in the Gulf have been doing the same.
So when the administration notes that the job loss has been lower than originally feared, it’s missing the point. It’s companies like Noble and Diamond – and their shareholders – who are bearing the biggest cost of the moratorium.
The question facing the companies and their investors now is how quickly things will recover. The ban’s been lifted, but the uncertainty remains.
