Halliburton expects fast asbestos deal

Executives also responded to persistent criticism of the company's no-bid contract to rebuild Iraq's oil industry and a Pentagon audit released last week that said Halliburton charged up to $61 million too much for delivering gas to Iraqi citizens. The company denies overcharging.

On Tuesday, the Houston-based oil services and construction conglomerate filed a long-awaited, pre-negotiated bankruptcy petition for subsidiaries DII Industries and Kellogg, Brown & Root and some of their subsidiaries to settle more than 370,000 asbestos and 21,000 silica claims as part of the settlement first announced a year ago.

If approved by U.S. Bankruptcy Judge Judith Fitzgerald in Pittsburgh, the deal would absolve the company once run by Vice President Dick Cheney of all current and future asbestos claims.

Christopher Gaut, Halliburton's chief financial officer, said some insurers are expected to oppose the deal -- which has been approved by nearly all asbestos and silica claimants -- at a Jan. 13 hearing. He said company officials are confident the judge will dismiss their concerns and allow the deal to proceed.

Neither Halliburton nor KBR's government services business, which provides services in Iraq, are part of the bankruptcy. The company said the subsidiaries who were involved will continue normal operations.

Of the $2.775 billion in cash set aside for the deal, DII paid $326 million Tuesday, Gaut said. The settlement also includes $1.4 billion in Halliburton shares once the reorganization plan is approved by the court, he said.

"This begins to remove any uncertainty associated with the total magnitude of potential liability of asbestos claims," Hibernia Southcoast Capital analyst Pierre Conner said of the bankruptcy filing.

Gaut said Halliburton expects to take a $1 billion charge in the fourth quarter related to the settlement, which will have a $2.30-per-share after-tax effect on earnings.

"The charge is incremental, associated with getting the settlement," Conner said. "The market should have been anticipating some charges there, so it shouldn't be a significant negative."

Regarding KBR's work in Iraq, the Pentagon audit found Halliburton was charging $1.09 per gallon more for gasoline it transported to Iraq from Kuwait than for the same fuel brought in from Turkey. Pentagon officials said last week Halliburton's Kuwaiti subcontractor apparently charged too much for the gasoline.

Randy Harl, KBR's chief executive, on Wednesday said the Kuwaiti subcontractor was the only one of four firms that met specifications set by the Army Corps of Engineers, and the contract required Halliburton to buy gasoline in Kuwait.

On Tuesday Sen. Joseph Lieberman, a Democratic presidential contender, asked the Pentagon to consider barring Halliburton from future government contracts. The Pentagon said the Defense Department is reviewing contracts, including that of KBR.

Halliburton inherited the asbestos claims when the conglomerate, while under Cheney's leadership, bought Dresser Industries Inc. for $7.7 billion. Cheney left Halliburton in 2000 to be President Bush's running mate.

The bankruptcy was filed in Pittsburgh because most of the asbestos claims were filed against a former Dresser subsidiary, Pittsburgh-based Harbison-Walker Refractories Co., which also is in Chapter 11 bankruptcy.

In afternoon trading on the New York Stock Exchange, Halliburton shares were up 42 cents at $25.56.