By BEN CASSELMAN
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Getty Images Fire boats sprayed water on Transocean's Deepwater Horizon in the Gulf of Mexico on April 21, a day after the rig caught fire.
The sinking of the Deepwater Horizon drilling rig, which triggered the spill spewing oil into the Gulf of Mexico, caught the energy world by surprise. The operator, Transocean Ltd., is a giant in the brave new world of drilling for oil in deep waters far offshore. It had been honored by regulators for its safety record. The very day of the blast on the rig, executives were aboard celebrating its seven straight years free of serious accidents.
But a Wall Street Journal examination of Transocean's record paints a more equivocal picture.
Nearly three of every four incidents that triggered federal investigations into safety and other problems on deepwater drilling rigs in the Gulf of Mexico since 2008 have been on rigs operated by Transocean, according to an analysis of federal data. Transocean defended its safety record but didn't dispute the Journal's analysis.
In addition, an industry survey of oil companies that hired Transocean perceived a drop in its quality and performance, including safety by some measures, compared with its peers, though it still scored tops in one safety category.
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Already the largest deep-water driller, Transocean in November 2007 took over rival GlobalSantaFe in an $18 billion deal. A Journal analysis of records maintained by the U.S. Minerals Management Service found that Transocean's share of incidents in deep water investigated by the regulator has gone up since the merger, even after accounting for its increased size.
From 2005 through 2007, a Transocean rig was involved in 13 of the 39 deep-water drilling incidents investigated by the MMS in the Gulf of Mexico, or 33%. That's roughly in line with the percentage of deep-water rigs, 30%, Transocean owned and operated in the Gulf then, according to data firm RigLogix.
Since the merger, Transocean has accounted for 24 of the 33 incidents investigated by the MMS, or 73%, despite during that time owning fewer than half the Gulf of Mexico rigs operating in more than 3,000 feet of water.
Some of Transocean's clients have cited the merger as a reason they believe the company's performance has dropped.
Transocean says it is committed to safety and has a strong overall safety record. Larry McMahan, Transocean's vice president for performance, said the company investigates all incidents and adjusts its procedures accordingly. He said he believes the 2007 merger went smoothly.
"We are a learning company. We do not make the same mistakes again," Mr. McMahan said.
The April 20 explosion aboard the Deepwater Horizon killed 11 workers and has left thousands of barrels of oil a day pouring into the sea.
Besides Transocean's record, lawmakers and Gulf Coast residents have questioned those of BP PLC, which hired Transocean to drill the well, and the MMS, a federal agency that oversees the offshore drilling industry. Those questions are likely to grow if evidence emerges that Transocean had a pattern of problems.
There were few indications of any trouble with the Deepwater Horizon before the explosion. The rig won an award from the MMS for its 2008 safety record, and on the day of the disaster, BP and Transocean managers were on board to celebrate seven years without a lost-time accident.
Toby Odone, a BP spokesman, said rigs hired by BP have had better safety records than the industry average for six years running, according to MMS statistics that measure the number of citations per inspection. BP has been a finalist for a national safety award from the MMS for the past two years. Mr. Odone wouldn't comment on BP's relationship with Transocean after the Gulf disaster but said BP continues to use Transocean rigs. The MMS declined to comment.
The cause of the April 20 explosion hasn't been determined. Investigators are expected to focus on two things: a cement seal meant to keep oil and gas from escaping from a well, and the blowout preventer, a set of valves on the ocean floor that is supposed to close off a well in an emergency.
Transocean has had problems with both, MMS records show.
In 2006, regulators found, a blowout preventer failed, in part because of maintenance issues. In 2005, a well leaked drilling fluid because of problems with the cement seal.
Transocean's Mr. McMahan said cementing issues are primarily the responsibility of an outside contractor hired by owner of the well. He said Transocean has a strong maintenance program to keep blowout preventers working.
Oil companies must inform the MMS of all offshore incidents such as injuries, fires and oil spills. The agency investigates those it deems serious and makes public its reports. Those are the incidents the Journal analyzed.
A decision to investigate an incident doesn't mean a company broke any laws. The MMS issued citations in only a quarter of the Transocean cases it investigated since the start of 2008, mostly for failure to follow safety procedures or for small oil spills.
The MMS says it issues fines only in limited circumstances, such as spills or when workers don't use required safety equipment. The agency can convene panels to conduct more detailed investigations into major incidents, but rarely does.
Some of the investigated incidents on Transocean's rigs have been minor, involving incidental injuries, dropped equipment and small leaks.
MMS investigators linked several Transocean incidents to workers' failure to follow company procedures. In a 2008 case, the Deepwater Horizon partially flooded and began to tilt after a worker removed a piece of pipe without telling those in overall charge of the vessel. Regulators didn't find any violations.
The MMS has investigated four fires aboard deep-water drilling rigs since 2005, all operated by Transocean.
Last September, for instance, a fire broke out on a brand-new Transocean rig, the Discoverer Clear Leader. It knocked out power to the thrusters that keep the rig in position above the well—a serious situation, because if a rig drifts too far it can disconnect from the well and cause a spill. Power was restored in time.
Transocean's Mr. McMahan said the company has trained firefighters aboard all rigs, and he didn't believe it has a problem with fires.
In 2006, Transocean's Discoverer Enterprise was drilling for BP in over 6,000 feet of water when a gauge suggested a leak from the blowout preventer. It took nearly an hour for a robot submarine to reach the valve and determine that it was leaking drilling fluid. The robot tried to shut down the well, but didn't have enough hydraulic fluid to add to the valve.
A second robot shut down the well about five hours after the problem arose. Investigators estimated 54 barrels of fluid spilled into the Gulf.
MMS investigators found that debris had gotten into the blowout preventer and reduced its effectiveness. The agency said the problem was caused in part by "extended use of [the blowout preventer] without inspection/maintenance."
Transocean said it couldn't comment on details of the incident. BP, the owner of the well being drilled, was cited by the MMS for failing to prevent a spill.
Most incidents reported to the MMS take place in shallow water, either on "jack-up" rigs that stand on the sea floor or on small, often unmanned platforms that produce oil and gas from the thousands of wells in the Gulf drilled in the offshore industry's 60-year history.
Transocean operates only a few rigs in shallow water. It specializes in a new frontier, drilling from huge floating rigs that are either anchored to the sea floor or kept in place with satellite-controlled thrusters. This work is done for major oil producers such as BP, Chevron Corp. and Exxon Mobil Corp. Transocean was founded in Louisiana in 1926 as Danciger Oil & Refining Co., and was based in the U.S. until it relocated to Switzerland in 2008, partly for tax reasons.
BP is Transocean's biggest client in the Gulf of Mexico, hiring four of the 14 rigs the driller had there at the time of the fire. The Deepwater Horizon had worked on BP projects for years, and BP just last year extended its $500,000-a-day contract.
Oil companies typically review contractors' safety and environmental records before hiring them. Transocean's business could suffer if it develops a reputation for problems, said Arun Jayaram, an energy analyst with Credit Suisse in New York. "You just wonder if the incident makes it a little bit more challenging for Transocean," he said.
Transocean's Mr. McMahan said he didn't believe the incident would hurt the company's ability to find customers.
BP said last week it was asking all contractors to review their safety procedures and in particular to confirm that blowout preventers meet industry standards. Transocean is complying with the request, Mr. McMahan said.
Transocean Chief Executive Steven Newman told investors in a May 6 conference call that two rigs in India were offline in the quarter, in one case because of a problem with the blowout preventer. He said the company had "put in place a team specifically looking at the performance of the deep-water fleet" and to deal with equipment problems.
Transocean's 2009 safety record, as measured by injuries per hour worked, is better than the overall industry average. Companywide, Transocean had 0.77 injuries per 200,000 man hours, vs. 0.81 for all offshore rigs world-wide, including those in both deep and shallow water, according to statistics compiled by the International Association of Drilling Contractors. Still, its record was worse than those of some big deep-water competitors. Noble Corp. had 0.47 injuries per 200,000 hours, and Ensco PLC had 0.6.
Safety has improved for the industry as a whole, including at Transocean, whose injury rate has fallen 16% since 2007, according to securities filings.
Transocean's board was sufficiently concerned about safety that it eliminated all executive bonuses for 2009 after four workers died aboard rigs in separate incidents. In a securities filing 20 days before the Deepwater Horizon accident, Transocean said the move would "underscore the company's commitment to safety" and give executives incentives to prevent accidents. The company said Mr. Newman, who took over as CEO March 1, and other managers brought the proposal to the board.
Recent years have seen a rapid increase in deep-water drilling as companies push farther out in search of oil. The number of rigs able to drill in 3,000 or more feet of water is up 43% since 2006, to 146, according to research firm ODS-Petrodata. Sixty-five more are under construction.
Contractors have struggled to find enough experienced workers. Veteran crews are sometimes poached by new competitors, leaving rigs with less-experienced workers. "You've had trained personnel at a shortage, people stealing experienced crews," said Mike Smith, president of Bassoe Offshore, which advises companies on buying and selling offshore rigs. Mr. Smith said both BP and Transocean have strong safety records.
There are indications Transocean's reputation suffered after it acquired GlobalSantaFe in 2007. Before the merger, Transocean routinely ranked near the top in surveys by Energy Point Research, which rates oil-service firms on customer satisfaction. Since the merger, Transocean's rankings have fallen to close to the bottom in many categories.
In 2008 and 2009, the surveys ranked Transocean last among deep-water drillers for "job quality" and second to last in "overall satisfaction." For three years before the merger, Transocean was the leader or near the top in both measures.
Transocean ranked first in 2008 and 2009 in a category that gauges its in-house safety and environmental policies. In a category that measured perceived environmental and safety record, Transocean ranked in the middle of the pack in the polls.
In anonymous comments submitted with the surveys, some customers cited the merger as a problem. "The company is so large, they don't even know which assets and related equipment are available and when," an engineer with a major oil company wrote last September.
Other comments were positive. Transocean "is our rig contractor of choice," one said in 2008. A customer in 2009 called Transocean "the prototype of an offshore driller for the next several decades."
Mr. McMahan said that the merger had gone well but that, as with most mergers, the joined companies had to learn how to communicate and work together.
"It's a merger of two like companies with very similar cultures," Mr. McMahan said.
