Sunken Oil Platform Owner Had Safety Concerns
DALLAS — Transocean Ltd., which owned the drilling rig that exploded in the Gulf of Mexico, eliminated bonuses for top executives last year over concerns about safety problems at the company.
The company said in a regulatory filing on April 1 that it eliminated the bonuses "to underscore the company's commitment to safety" after four workers died in accidents in 2009 "and to increase the incentive for executive officers to promote ... the avoidance of future fatal accidents."
Less than three weeks later, the company's Deepwater Horizon rig, which it leased to BP PLC, blew up and sank. Eleven workers were killed and the accident spawned a huge oil spill that is now endangering wildlife and businesses along the Gulf's coastline.
Transocean's chairman and CEO told shareholders in a letter in March of a "thorough review" of safety practices taking place across the company.
Separately, some survivors claimed in a lawsuit Tuesday that they were stranded in life rafts for more than 10 hours after the explosion, watching the rig burn and knowing that other men were missing.
Transocean spokesman Guy Cantwell defended the company's response to the April 20 explosion 50 miles off the Louisiana coast.
"One-hundred and fifteen people got off this rig alive," Cantwell said.
Cantwell said management recommended the decision not to pay executive bonuses last year.
Cantwell said the four deaths in 2009 occurred on different rigs in four different countries. Reports on one death, in Azerbaijan, appeared in the media, but Cantwell declined to disclose other locations and whether any were in U.S. waters. None were related to drilling, he said.
The company had two workers killed in 2008 and none in 2007, Cantwell said.
Transocean is scheduled to report first-quarter financial results on Wednesday, followed by a conference call with analysts on Thursday. From April 20, the date of explosion, through the close of trading Monday, Transocean's stock market value fell to $23.45 billion from $29.6 billion. Shares were down slightly on the New York Stock Exchange again Tuesday.
The company is already facing lawsuits. A Houston law firm filed a wrongful-death claim in a Texas state court Tuesday on behalf of one of the 11 killed on the Deepwater Horizon and three survivors. The lawsuit alleges that the rig wasn't seaworthy and didn't meet federal safety standards.
According to the lawsuit, a supervisor rushed to get crews on life rafts but once they pushed away from the rig, the company decided "to keep these men there for over 10 hours alongside the blazing rig as the men stared at the rig knowing their friends were on it."
The family of another dead worker filed a lawsuit in federal district court in Louisiana shortly after the explosion, charging Transocean and BP with negligence.
Several other lawsuits have been filed against the companies on behalf of fishermen and others who expect to be harmed by the spill, and the governor of Florida is considering suing.
Fitch Ratings on Tuesday changed its outlook on Transocean debt to "stable" from "positive," citing the potential for large legal expenses and liabilities related to the oil spill. Fitch didn't change it ratings on Transocean debt, which are "BBB," or investment-grade but carrying a moderate default risk.
Fitch said Transocean carries $950 million in liability coverage before deductibles, and oil companies usually repay rig owners for costs related to blowouts. But the rating agency said Transocean could still be vulnerable for damages above $950 million if was found to be negligent.
Insurance should cover the loss of the $560 million Deepwater Horizon, which sank in about 5,000 feet of water, but Transocean has a deductible of $10 million per event on personal injury liability, Fitch said.
Transocean's annual shareholder meeting is planned for next week in Switzerland.