Transocean (RIG) Poor Safety Culture Contributes to Gulf Spill, Alleges Coast Guard

Saying the emergency training, equipment and safety culture of Transocean (NYSE:RIG) had flaws in it, the Coast Guard released a report alleging the company contributed to the failure of the Deepwater Horizon oil rig which exploded in the Gulf of Mexico while extracting oil and gas from the Macondo well owned by BP (NYSE:BP).

Transocean owned the rig, and was thus the primary bearer of responsibility for its safety, the reason the Coast Guard zeroed in on them.

According to the report, electrical equipment that may have been responsible for igniting the explosion was poorly maintained, while gas alarms and automatic shutdown systems were bypassed so that they did not alert the crew. Also alleged was rig workers didn't receive proper training on how and when to disconnect the rig from the well to avoid an explosion.

The reported concluded, "These deficiencies indicate that Transocean's failure to have an effective safety management system and instill a culture that emphasizes and ensures safety contributed to this disaster."

Transocean closed Thursday at $75.41, falling $0.20, or 0.26 percent.

BP (BP) Price Target, EPS Raised by Benchmark

Benchmark raised its price target and EPS on BP (NYSE:BP), citing the high price of oil.

The oil giant also recently announced it's divesting its Arco Aluminum subsidiary, selling it to a consortium of Japanese companies.

In response to the federal government's lawsuit seeking damages for the Deepwater Horizon oil spill under the Clean Water and Oil Pollution Acts, BP said that the government's "request for a declaratory judgment regarding alleged damages under OPA constitutes improper claim splitting."

BP was trading at $46.92, gaining $46.94, gaining $1.05, or 2.29 percent, as of 2:17 PM EDT. Benchmark has a price target of $70 on the company, along with a "Buy" rating.

Chevron (CVX) Latest to Get Gulf Drilling Permit

There is no doubt the tension and unrest in the Middle East has forced the hand of the Obama administration to reward more permits to drill in the Gulf of Mexico, as they had been dragging their feet for months for no reason. Chevron (NYSE:CVX) was the latest to receive a permit to drill in the Gulf.

The federal government on Thursday approved Chevron Corp. for the first permit for completely new exploration in the Gulf of Mexico, saying the oil company had satisfied requirements to show that it could contain a subsea blowout.

It is the fifth deepwater permit since new standards were put in place after the Deepwater Horizon blowout and spill last year, but the first to drill in a new oil field.

The Bureau of Ocean Energy Management, Regulation and Enforcement issued a revised permit to drill in 6,750 feet of water 216 miles south of Lafayette, La.

Chevron closed Thursday at $105.38, dropping $0.10, or 0.09 percent.





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BP (BP) Settles with Widow of Oil Rig Worker

BP (NYSE:BP) has reportedly settled with the widow of Deepwater Horizon oil rig worker Keith Blair Manuel, who perished when the rig exploded and dropped to the bottom of the Gulf of Mexico.

Per terms of the agreement, U.S. District Judge Carl Barbier of New Orleans today agreed to dismiss Melinda Anne Becnel’s suit against BP in exchange for the settlement.

Terms of the settlement weren't disclosed, which lawsuit didn't include the owner of the oil rig - Transocean (NYSE:RIG).

Claims made by Becnel against BP were also dropped, as well as other oilfield contractors.

This is only one of over 350 lawsuits filed against the oil giant and other companies connected to the Macondo Well.

BP closed Monday at $45.07, down $0.68, or 1.49 percent.

BP (BP), Transocean (RIG) Divorce Would be Costly

With a lot of stress on the business relationship between BP (NYSE:BP) and Transocean (NYSE:RIG), it could cost the two potentially hundreds of millions if the relationship falls apart.

Transocean owned the Deepwater Horizon drilling rig, operated by BP, which exploded and started the Gulf oil spill.

Even though the Gulf incident ended up costing Transocean about $137 million, they see a disintegrating relationship with BP as much more costly.

In a filing with the SEC, Transocean said BP accounted for about 10 percent of its overall $9.6 billion in revenue for 2010. Existing agreements are valued at almost three times that, coming to $2.9 billion.

In the filing Transocean called BP its "most significant customer," and the loss of business with BP would probably end up having a "material adverse effect" on the company.

It wasn't clear if this was a reference to BP wanting Transocean and others to pay for part of the damages associated with the oil spill, but it's a strong probability it is.

Transocean closed Monday at $84.63, gaining $1.83, or 2.21 percent. BP closed at $48.47, up $0.37, or 0.77 percent.

Transocean (NYSE:RIG) Drops $800 Million on $1 Billion Write-Down

After the explosion on their Deepwater Horizon oil rig in the Gulf of Mexico, which was operated by BP (NYSE:BP), Transocean (NYSE:RIG) has struggled to generate revenue, and was forced to book a $1 billion charge, resulting in a loss of $799 million in the fourth quarter.

For the quarter Transocean had a net loss of $2.51 a share, reversing a profit of $2.24 a share, or $723 million, in the same quarter last year.

Revenue for the quarter dropped 21 percent to $2.16 billion from $2.73 billion.

Excluding charges, adjusted earnings came to 68 cents a share, missing the 88 cents a share estimated by analysts polled by FactSet. Revenue was also lower than the $2.28 billion projected by analysts.

Charges in the quarter came to $1.02 billion, or $3.19 a share, which included $1.01 billion to account for a current and estimated decline in day rates and utilization, and a loss on the retirement of debt.

Separately, Transocean booked expenses of $28 million, or 8 cents a share, in connection to the loss of the Deepwater Horizon oil rig.

BP (NYSE:BP) Argues Spill 50 Percent Lower than Estimates

BP (NYSE:BP) is fighting back against the numbers thrown out as to how much oil actually spilled into the Gulf of Mexico, saying it could be up to 50 percent less than estimated.

"BP has not offered its own numbers yet, but BP has told us that it thinks the government's numbers are too high," said Priya Aiyar, deputy chief counsel at the BP Deepwater Horizon Oil Spill and Offshore Drilling commission. It thinks the actual flow rate could be 20% to 50% lower."

It is interesting to note that the original amount of oil left in the ocean as reported by NOAA was confirmed as accurate after the big hoopla and accusations made against them.

Now it generates the question, obviously being exploited by BP, on whether or not the estimates on the oil flow were accurate as well; something BP obviously believes isn't.

Some are already saying this is an attempt by BP to bypass being labeled as having been grossly negligent in the event, which would be a difference of close to $16 billion, with $21 billion being the most they would pay, and $4.9 billion the least.

BP wrote the commission saying the "reservoir properties are more consistent with a lower daily flow rate during the duration of the flow."

Transocean (NYSE:RIG) Talking with Shell (NYSE:RDS-A), Anadarko (NYSE:APC), BHP (NYSE:BHP Over Force Majeure

Transocean (NYSE:RIG), which owned the Deepwater Horizon oil rig which was operated by BP (NYSE:BP) at the time of the explosion in the Gulf of Mexico, is in talks with Shell (NYSE:RDS-A), Anadarko (NYSE:APC), BHP (NYSE:BHP over force majeure, or otherwise known as 'Acts of God,' as the Obama administration refuses to allow any new permits in the region.

Although the Obama administration has dropped the oil moratorium in the Gulf, that was largely symbolic, as they effectively have it in place by not allowing the permits to be approved.

Consequently, Transocean is scrambling to renew force majeure contracts with the companies mentioned above so they aren't cancelled completely. They expired at the end of November.

The companies agreed with Transocean to continue the contracts for a reduced lease rate after the Gulf accident. Together they represented revenue of $1.58 million a day for Transocean.

Force majeure provides an out for a contract if events beyond the control of a company prohibits them from using a rig.

A minimum of five deepwater drilling rigs are going to or have left the Gulf of Mexico since the ban.

BP (NYSE:BP) Must Wait for Devon (NYSE:DVN) Oil Block Decision from Brazil

The state oil director of Brazil, ANP, told BP (NYSE:BP) they'll have to wait until 2011 before they decide on whether or not to allow them to go ahead with a proposed acquisition of offshore oil blocks from Devon Energy (NYSE:DVN).

ANP said they want to get more clarity on the plans of BP for the oil blocks before they make the decision.

Also of concern was a requirement for more information on the Deepwater Horizon oil rig explosion and failure which led to the disaster in the Gulf of Mexico.

Haroldo Lima, director general of the ANP, is interested in the long-term commitment of BP, and whether that's part of their strategy. BP Chief Executive Officer Robert Dudley has said they're interested in a long-term relationship with Brazil.

BP (NYSE:BP) Has Bizarre Claims Made Against Them

Admitting there is no evidence anyone at BP (NYSE:BP) so-called "consciously" made an effort to undermine safety on the Deepwater Horizon oil rig, University of California at Berkeley professor Bob Bea concluded it was the "underlying unconscious mind that governs the actions of an organization and its personnel," which resulted in the accident and its consequences.

What a bizarre conclusion. And this guy is teaching the young people of America!

In other words, the new media age doesn't allow for the nonsense of drawing unprovable conlusions, so the mystical unconscious mind created by the BP management is supposedly behind the catastrophe. And these people call themselves scientists, and are expected to be taken seriously. Sounds like voodoo, not science.

Bea stated: "Perhaps there is no clear-cut 'evidence' that someone in BP or in the other organizations in the Macondo well project made a conscious decision to put costs before safety; nevertheless, that misses the point. It is the underlying unconscious mind that governs the actions of an organization and its personnel."

That BEA says it "misses the point," is actually missing the point.

This was the group of 60 scientists and independent offshore drilling "experts" called the Deepwater Horizon Study Group which came to this conclusion.

Even though there is absolutely no proof of this on the part of BP, certain elements of the university and scientific community simply can't stand that the narrative couldn't be created that BP did this in attempts to save time and money at the expense of safety.

Nobody doubts things could have been handled better, that's why the accident happened, because there were failures. But to appeal to the unconscious mind as to what governs BP, and by extension, other businesses and organizations, is a bizarre and strange way of looking at circumstances. But then again, this has come from the cradle of the failed California experiment, which embraces this type of mysticism.

BP (NYSE:BP) Made Bad Decisions Says Panel

Conclusions from a technical panel found that BP (NYSE:BP) responded poorly to circumstances as they unfolded, leading to the explosion on the Deepwater Horizon oil rig it was operating in the Gulf of Mexico.

The report stated there was a “lack of operating discipline” concerning the signs of potential risk to the rig and operations, which were apparently ignored.

Findings from the National Academy of Engineering and the National Research Council:

- Failures indicate the lack of a suitable approach for anticipating and managing the inherent risks, uncertainties, and dangers associated with deepwater drilling operations.

- Accident precipitated by decision to proceed to temporarily abandon well, despite indications from negative pressure tests that indicated problems with well integrity.

- BP, its contractors, and the government did not identify or correct critical mistakes.

- Decision to move ahead with completing project was compounded by delays in realizing natural gas was flowing in well and riser and failure to take timely well-control actions.

- Proceeding to remove drilling mud from well without installing lockdown sleeve on production casing wellhead seals may have also contributed to accident.

- Decisions to move ahead despite warning signs indicate "insufficient consideration of risk and a lack of operating discipline."

- There were insufficient checks and balances for decisions regarding schedule and procedures for well abandonment and considerations for well safety.

- Other factors that may have contributed to accident include BP's decision to use long string well design, use of only six centralizers on casing and not running bond log to assess cement integrity in well.