BP’s Quest for Transocean Spill Payment May Be Helped by Report
A U.S. Coast Guard report that cited safety failures by drilling-rig owner Transocean Ltd. (RIG) may help bolster BP Plc (BP/)’s effort to recover some of the costs of last year’s oil spill in the Gulf of Mexico, an analyst said.
Transocean’s poor maintenance of electrical equipment, bypassing of gas alarms and automatic shutdown systems and a lack of training played a role in the April 20, 2010, catastrophe, the Coast Guard said in a 288-page report released yesterday. The disaster killed 11 rig workers, injured 16 and left crude pouring into the Gulf for 87 days.
BP, which leased the Deepwater Horizon rig from Vernier, Switzerland-based Transocean, sued the company on April 20 for billions of dollars in damages, saying that without its “misconduct,” there wouldn’t have been any explosion, fire, deaths or oil spill. Transocean lacked effective safety management and culture, which “contributed” to the disaster at the rig, according to the Coast Guard report.
“BP will probably look at it as helping support their argument that Transocean is partially to blame,” said Brian Youngberg, an analyst at Edward Jones in St. Louis. BP may be “more persistent” in trying to get Transocean to help pay for the disaster, he said.
BP, based in London, said in its complaint in federal court in New Orleans that it has incurred costs of $17.7 billion and that it took a pretax charge last year of $40.9 billion in relation to the spill.
Scott Dean, a spokesman for BP in the U.S., didn’t immediately respond to an after-hours e-mail and voicemail seeking comment on the Coast Guard report. An e-mail to BP’s U.S. media affairs also wasn’t returned.
“We strongly disagree with, and documentary evidence in the Coast Guard’s possession refutes, key findings in this report,” Lou Colasuonno, a Transocean spokesman in New York, said in an e-mail yesterday.
“The Coast Guard inspected the Deepwater Horizon just seven months before the Macondo incident and certified the rig as being fully compliant with all applicable U.S. and international marine safety compliance standards, including those associated with fire and gas detection systems,” Colasuonno said. “The company looks forward to setting the record straight.”
While BP likely will pay for the vast majority of the costs related to Macondo, Transocean may end up paying some of the costs if BP continues to push, said Youngberg, who has a “hold” rating on Transocean’s shares and BP’s American depositary receipts and doesn’t own either.
The explosion and subsequent sinking of the rig has led to hundreds of lawsuits against BP and its partners and contractors.
The report is volume 1 of a Coast Guard and Interior Department joint investigation. The Coast Guard has jurisdiction over what happened on the Deepwater Horizon rig, according to a statement yesterday. The report covers the explosions, the resulting fire, evacuations, the flooding and sinking of the rig, and safety systems.
The report didn’t analyze what led to a loss of well control or aspects that are overseen by the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement. The final report by the joint investigation team is expected by July 27, according to the Coast Guard.
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