Transocean Risk Quotient Down 86%, prior to Explosion and 99% Stock Price Fall
Transocean operated the Deepwater Horizon oil rig, which exploded on April 20, 2010, leading to the largest marine oil spill in history.
RQ Score dropped to 12 in 10-K on 2010-02-24, from an already low score of 20.
$1 billion civil penalty and $400 million criminal penalty; stock price falls 99%.
Incident highlights risks for counterparties such as British Petroleum (BP).
Risk factors from 10-K filing on 2010-02-24 highlighted by RR X™
Insurance: “insurance matters, including adequacy of insurance, insurance proceeds and cash investments of our wholly owned captive insurance company … we do not generally have commercial market insurance coverage for physical damage losses, including liability for removal of wreck expenses.”
Regulatory Costs: Implementation of additional MMS regulations may subject us to increased costs or limit the operational capabilities of our rigs and could materially and adversely affect our operations in the U.S. Gulf of Mexico.”
Rig Damage: “Hurricanes Ivan, Katrina and Rita in 2005 and Hurricanes Gustav and Ike in 2008 caused damage to a number of rigs in the U.S. Gulf of Mexico. … these guidelines may negatively impact our ability to operate other semisubmersibles in the U.S. Gulf of Mexico in the future.”
The impact of this risk event was massive and long-lasting
BP found out that it was not entitled to the insurance payment it had expected to receive from Transocean’s coverage.
“In January 2013 Transocean agreed to a $1 billion civil penalty under the Clean Water Act. … The company also pled guilty to criminal violations of the Clean Water Act, resulting in a $400 million criminal penalty.”
The movie Deepwater Horizon permanently etched the memory in the public’s view. 14 years later, Transocean’s stock has never recovered.
1 Cite: safety4sea.com
2 Cite: britannica.com
Highlighted Text Color Key:
- Extremely Concerning
- Very Concerning
- Somewhat Concerning
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