Hess Can’t Recover $218 Million in Damages From Schlumberger

(Bloomberg) -- Hess Corp. failed to persuade a federal judge to award it $217.9 million to repay the cost of recovering and replacing four allegedly defective subsea valves made by Schlumberger Technology Corp.

U.S. District Judge Sim Lake issued his ruling on Thursday, more than eight months after conducting a non-jury trial in February. Based on the evidence and his prior rulings in the case, Lake said, the energy company couldn’t recover damages. He said the valves failed because Hess operated them improperly, not because the parts were substandard when Schlumberger delivered them in 2012.

Hess paid about $2.6 million for the four complex valve assemblies, which failed several years after they were installed in Hess’s Tubular Bells deep-water production system 135 miles south of New Orleans in the Gulf of Mexico. Replacing the valves with ones by another manufacturer and installing the substitutes cost Hess $210 million and another $5.3 million in lost production while the wells were shut, Lake determined.

Hess spokeswoman Lorrie Hecker said the company was reviewing the decision.

The judge signaled he believes Hess will appeal his decision, particularly his 2017 ruling throwing out a claim that he subsequently decided provided the only legal basis for Hess to recover damages. He calculated the damages in case Hess can convince an appeals court that the valves were substandard.

Lake said Hess operated the wells with inadequately experienced and trained personnel, who ran them at such low pressure that the values couldn’t stay open and were exposed to “uncommonly high” numbers of shutdowns and temperature swings. This let drilling fluids and debris backflow through the valves, scratching them so severely that they could no longer seal properly and blew out, he said.

The massive valve assemblies are about 15 feet long and were installed roughly 4,000 feet below the sea floor, in water 4,300 feet deep.

Schlumberger Technology is a unit of Schlumberger.

The case is Hess Corp. v. Schlumberger Technology Corp., 16-cv-3415, U.S. District Court, Southern District of Texas (Houston).

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