By OGJ editors
HOUSTON, June 23 -- Halliburton Co. has announced a non-binding heads of agreement (HOA) and additional operating losses of $104 million on the Barracuda-Caratinga project off Brazil.
The additional charges follow a thorough review of the project indicating higher cost estimates, schedule extensions, and other factors, Halliburton said, adding the charges would affect second quarter earnings.
Meanwhile, its engineering subsidiary KBR signed an HOA for the Barracuda-Caratinga project to resolve numerous disputed issues. Halliburton and Petroleo Brasiliero SA (Petrobras) are arguing about cost revisions that delayed a $2.5 billion order for two rigs.
Under a contract with Petrobras, Halliburton's Brown & Root Energy Services and Halliburton Energy Services business units, together with Petrobras's exploration and production unit, are developing the Barracuda-Caratinga fields (OGJ, Sept. 11, 2000, p. 88 ). Petrobras will operate the fields and lease the facilities for 10 years, but the Halliburton units are undertaking the bulk of the development work.
Halliburton said participants agreed to extend the completion deadline to 2005. Previously, Petrobras said that it expects to finish the project by the end of 2004.
Petrobras agreed to pay $59 million in previously disputed claims, and the two companies will go to arbitration to settle $375 million in disputed claims.
"Even if (Halliburton) gets 100% reimbursement of the $375 million in disputed claims, the project will still be in the red by about $92 million to date," said James Crandell, managing director of Lehman Bros. Oil Service Equity Research in New York.
Timing of the arbitration is unknown, Halliburton said. The HOA remains subject to lender approval and final agreement. The parties have had preliminary discussions with the lenders but no agreement for their approval has been obtained yet.
"The performance of the Barracuda-Caratinga project is very disappointing, particularly in light of the strong performance in the rest of our business," said Dave Lesar, Halliburton chairman, president and CEO. "I am however pleased at the number of positive results which have come out of our recent negotiations with Petrobras."
