Transocean transcripts - what did they know & when did they know it

[suffragette]

I stumbled upon a site that that has transcripts of Transoceans' Earning transcripts and have started reading some of them since in discussing their earnings they are discussing their operations.

It occurs as they are discussing midwater, deepwater and ultra-deepwater drilling. Steven Newman is the CEO.

Some items I noticed in their Q4 2009 report jumped out at me and I am trying to better understand them. They seem to me to indicate they didn't require as strict regulatory/safety safeguards on rigs that were not in the North Sea and the BOP issues were known to them.
Am I reading this correctly?



http://seekingalpha.com/article/190478-transocean-ltd-q4-2009-earnings-call-transcript?page=-1

Note: seekingalpha speciifes their "reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com" so I have kept this to under that.


Geoff Kieburtz – Weeden

Okay. Would it be fair for me to infer then that these Deepwater rigs are because of regulatory or safety case issues not necessarily able to compete in the U.K. North Sea market?

Steven Newman

Well, getting a rig that is not currently into the U.K. sector of the North Sea back into the U.K. sector of the North Sea does require some regulatory approvals. And there are rigs in the Transocean fleet that would be relatively straightforward to do that with. And there are some that we would prefer to keep on the international market.



Further on, they discuss issues with BOP:
Steven Newman

Yeah. On the Ultra-Deepwater fleet, Tom, where we were particularly focused in the fourth quarter and that differs from where we were in the second quarter of last year, which was on the conventional Deepwater fleet. In the Ultra-Deepwater fleet, we only had one BOP issue and one human error issue. We had a couple of startup issues and we had some equipment failures. But the issues in the fourth quarter were largely dissimilar from what we saw in the second quarter of last year.

Tom Curran – Wells Fargo

So would it be fair to say then that both the nature and the number of those issues in Q4 was more in line with what you would consider normal, whereas second quarter 2009 was clearly abnormal?

Steven Newman

Yeah. I wouldn't characterize the fourth quarter of 2009, I wouldn't characterize the performance on the Ultra-Deepwater fleet as normal because it was below the historical revenue efficiency for that class. So I don't want to lead you to conclude that's something we ought to expect going forward. But we have identified the issue, the equipment failure issues. We have addressed the BOP control issue and the human error issue is something we continue to focus on through our training and competency programs.

From the Q2 2009 (referred to above):
http://seekingalpha.com/article/154092-transocean-ltd-q2-2009-earnings-call-transcript?page=-1

Greg Cauthen
Our second quarter adjusted earnings per share of $2.79 was below the street due to a variety of revenue and cost factors. During the quarter, we had an unusual number of major operational incidents, mostly with respect to deepwater rigs, which resulted in a $30 million increase in lost revenue.

Steven Newman

The deepwater segment of the fleet, which is the 4,500 to 7,500 foot segment, 16 rigs in that fleet was the largest underperformer in the second quarter. We had a couple of human error incidents on drill floors on a couple of those rigs, and we had a handful of BOP problems. Nothing that I would characterize as systemic or quarter specific. We did a deep dive on each one of those incidents. We've identified the root causes. We are going back to address them in our management system so they don't happen again. It is uncharacteristic in the second quarter. They were anomalies, and I think I would just leave it at that.

Arun Jayaram - Credit Suisse

Steven, could any of the BOP issues impact Q3?

Steven Newman

No. They've all been resolved and BOP operations are a complex part of our business. It's something we pay a lot of attention to. All of the BOP incidents that occurred in the second quarter have been resolved, and we'll continue to keep our eye closely on the performance of our subsea equipment.


Interesting sidenote:
http://www.msnbc.msn.com/id/37073815/ns/business-oil_and_energy/page/2/
The bench is certainly facing a stress-test, because Newman's move to the helm topped off a busy year of nameplate switching in Transocean's management suites.

Chief Financial Officer Greg Cauthen opted to retire in April for "personal reasons" at age 51 as his colleagues moved to Switzerland. He was succeeded by an Oxford-educated senior vice president, Ricardo Rosa, who was already based in Europe.

MSNBC used the quotation marks around personal reasons. Wonder why they did that?

[damntexdem]

1. So far, there's little evidence that they know much at all.

But there is plenty of evidence of criminal activity.

[AuntPatsy]

6. Perfectly stated, even my husband feels as if they should be made to face justice and he is one of

them, its more than obvious there was major incompetence on the part of the top dogs.

[aquart]

2. So will this quarter's earnings be described as "abnormal"?

British Petroleum contracted to use rigs in OUR gulf that would not be allowed in waters controlled by Britain? Because WE allowed it? And therefore they could?

China would execute the CEOs. I don't normally admire China. Although I know I would enjoy seeing this.

But the fact is, it wouldn't have happened IF WE DIDN'T LET IT HAPPEN BY LAX REGULATION AND ENFORCEMENT. Rapaciously greedy and criminally culpable as the CEOs are, WE OPENED THE DOOR AND WELCOMED OUR MURDERERS IN.

[suffragette]

3. I'm wondering the same

Good point about BP contracting to use rigs they couldn't in their homebase.

That's the way it looks to me after reading this unless I'm missing something.

And absolutely agree about "lax regulation and enforcement." If anything shows the need to move away from "Cheney policy" to strict regulation, inspection and enforcement, this does.

[aquart]

4. I'm not thinking "strict" so much as draconian and punitive.

Like, we determine the amount of oil in the well, then we map out the body of the CEO and determine how much oil each part of his body proportionally represents. Something leaks, we cut to the correct amount.

And yes, I DO want my pound of flesh. Pounds.

[suffragette]

5. Remind me never to get on your bad side

;)


I want punitive as well.
But I want it drawn out longer. I want BP, Transocean and Halliburton held fully accountable. I want attempts to limit liability stopped, assets frozen and seized and made available to cleanup and to compensate those injured by this (including those not able to pursue their livelihoods). And I want a significant amount of their resources (financial and employees, including execs) on the ground working, as long as it takes (and not just visibly but entirely) to clean up.