Switzerland-based Transocean Ltd. — owner of drilling rig Deepwater Horizon, which burned and sank last month in the Gulf of Mexico (GOM) following an apparent well blowout — has received $481 million of an approximately $560 million in insurance proceeds it expects to receive this quarter, the company’s CFO told financial analysts Thursday.
“We have incurred costs in the current quarter related to the incident, and we will provide an update on them during our second quarter call, including commentary on provisions for contingent liabilities,” said CFO Ricardo Rosa.
BP plc is the majority owner and operator of the lease where Transocean’s rig was drilling on its behalf. The ruptured well was still hemorrhaging an estimated 5,000 b/d, or about 210,000 gal/day, of crude 5,000 feet below the surface of the GOM on Mississippi Canyon Block 252 following the April 20 accident (see Daily GPI, May 4).
On Thursday crews were preparing to lower a specially fabricated 100-ton collection device to capture the oil from the largest of two remaining leaks so it could be piped to the surface for processing (see Daily GPI, May 6).
According to CEO Steven Newman, it does not appear that the company will be financially liable for the environmental and other consequences of the oil leak that followed the rig’s sinking.
“The way the contract language typically reads, we are indemnified from any expense or claim related to pollution from the wellbore,” Newman said. “And we believe in this particular instance the contracts are pretty clear about that. Our industry has a long history of contract sanctity and we expect BP to honor that.”
Asked whether he was aware of incidents in the past similar to what occurred with Deepwater Horizon, Newman said he was aware of some over the history of the offshore drilling industry. “I’m sure we would identify well control events where hydrocarbons were allowed to get to the surface…none, obviously, of this magnitude.”
Newman confirmed that the company had received a letter from BP — which the oil major is said to have sent to all drilling contractors — asking it to verify the conditions of blowout preventers on its rigs. “We are currently going through the exercise of responding to the questions that are addressed in that letter,” he said.
In response to another analyst’s question, Newman said he expected the Obama administration to take a thoughtful approach to the regulation of offshore drilling following the accident. “I don’t think that the administration are going to act rashly about this,” he said. “I think they’re going to be as thorough as the industry is in understanding what happened.”
In a research note analysts at Barclays Capital predicted that the industry is in for a good deal of attention from regulators. “Every development plan could come under scrutiny; every failsafe mechanism may need examination to see if it needs to have another backup system and even more built in redundancy,” Barclays analysts said.
Transocean reported first quarter net income of $677 million ($2.09/share) on revenues of $2.602 billion, compared with net income of $942 million ($2.93/share) on revenues of $3.118 billion for the year-ago quarter.
In Washington a Department of the Interior (DOI) spokesperson confirmed it “is temporarily postponing public meetings on potential offshore activities so that information from the ongoing review of [Outer Continental Shelf] safety issues that the President has directed can be appropriately considered in those meetings.”
And besides, the Minerals Management Service (MMS) staff is engaged elsewhere. Spokesperson Julie Rodriguez said the MMS “and its Gulf of Mexico staff have focused their attention on the Deepwater Horizon incident and would be unable to conduct the meetings until a later date.”
Public scoping meetings had been scheduled this month on the proposed Lease Sale 220 off the coast of Virginia. The latest Obama offshore leasing plan, while not endorsing the Virginia sale, said that if it were approved it would take place in 2012, rather than 2011, when it was originally scheduled (see Daily GPI, April 1).
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