Place the fish skin and bones into a saucepan with the water. Bring to a boil, and reduce by one quarter. Strain, and reserve 1 1/2 cups. Preheat the oven to 400 degrees F (200 degrees C).
Cut halibut into bite size pieces, and coat with flour. Heat butter in a large skillet over medium-high heat. Fry the halibut pieces just until golden brown. Transfer fish to a baking dish; arrange fish in a single layer, and sprinkle with lemon juice, and salt and pepper.
Pour fish stock into the pan in which the fish was fried; cook over medium heat for 5 minutes, stirring and scraping the bottom of the pan. Stir in cream and sherry, and continue cooking for 3 to 5 minutes. Whisk egg yolks until frothy in a small bowl. Slowly whisk in a small amount of the cream sauce, and then whisk the mixture into the sauce. Pour over fish in baking dish.
Bake in preheated oven for 25 to 30 minutes. Serve in baking dish.