The Firm . Transocean: No Apologies Over Gulf Oil Spill


Transocean: No Apologies Over Gulf Oil Spill

Fourteen months after the Deepwater Horizon drilling rig exploded 50 miles southeast of Venice, La., killing 11 men and setting off the largest offshore oil spill in U.S. history, (RIG)Transocean, the company that owned and ran the ill-fated 32,600-ton vessel, finally issued its official account of what happened and why. It produced a report on June 22 of no fewer than 854 pages, divided into two volumes, and spared no detail. The bottom line, though, isn’t complicated:It was (BP)BP’s fault.

That Transocean would try to deflect blame isn’t surprising. The Swiss-incorporated, Houston-based drilling contractor is caught in a litigation frenzy involving British Petroleum; (HAL)Halliburton, which did cement work; and several other companies, including (AAPC)Anadarko Petroleum, one of the minority stakeholders in the well, and (CAM)Cameron International, manufacturer of a critical piece of safety equipment known as the blowout preventer. They are wrestling over who will get stuck with tens of billions of dollars in environmental and economic damage claims related to the blowout of BP’s Macondo well on Apr. 20, 2010.

Since then, Transocean has refused to acknowledge committing any mistakes that may have contributed to the disaster. It has declined to help pay for the cleanup. It has made no apologies. And what is remarkable is that this blame-the-client, admit-no-wrong, take-no-prisoners approach appears to be working.

Of 126 people aboard the Deepwater Horizon when it exploded, 79 worked for Transocean (versus only six for BP). Nine of the 11 fatalities were Transocean men. Transocean has settled with several families of those lost in the disaster, for undisclosed amounts, and has said in Securities and Exchange Commission filings that its costs related to the blowout totaled $160 million through Mar. 31, 2011. Yet it hasn’t put a single dime into the $20 billion victims-compensation fund BP established, a fund that is close to finalizing settlements with 17 former Transocean employees, according to Anthony G. Buzbee, a Houston plaintiffs’ attorney representing the workers. Overall, BP has spent $17.7 billion related to the spill as of the end of 2010—more than 100 times as much as Transocean, which last year, according to the U.S. Justice Dept., “actually booked a $270 million ‘accounting gain’ on the difference between the real value of the Deepwater Horizon and the amount it received in hull insurance following the vessel’s sinking.”

Transocean’s shrewd, defiant response strategy began almost from the moment the crew lost control of the well. Within 12 hours of receiving medical attention after the calamity, surviving Transocean employees were transported to a hotel in New Orleans, where they were questioned by company lawyers seeking to exonerate the drilling contractor, according to Buzbee and other plaintiffs’ attorneys. In subsequent months, even as BP pledged to “make it right” and raise billions for its relief fund, Transocean worked behind the scenes to minimize liability and convince investors everything was just fine.

In May 2010 it filed papers in federal court in Houston seeking to use a 169-year-old maritime statute to cap the company’s liability for deaths and injuries at less than $27 million. (The owners of the Titanic invoked the same law to notable success.) Then, shortly after trying to minimize its payments to widows and survivors, Transocean announced plans to issue $1 billion in dividends to its shareholders. It further declared in its annual report that despite the death and destruction in the Gulf, 2010 had been “the best year in safety performance in our company’s history.” It even handed out safety bonuses to top executives.“You almost have to admire their chutzpah—almost,” Steven Gordon, a plaintiffs’ lawyer in Houston, says of Transocean. Gordon represents eight former Transocean employees who survived the disaster and are suing the company and BP.


Paul M. Barrett
Bloomberg Businessweek
July 1, 2011