Transocean's Marianas drilling rig, image: Transocean

RIO DE JANEIRO -(Dow Jones)- Brazilian oil startup HRT Participacoes em Petroleo SA (HRTP3.BR) said Wednesday that it had hired a semisubmersible drill rig from Transocean Ltd. (RIG, RIGN.VX) to drill prospects off the coast of Namibia, where the company holds stakes in 12 exploration blocks.

In a filing with stock regulators, HRT said a final contract would be signed in 15 days. The Transocean Marianas semisubmersible rig will be hired for 280 days, enough time to drill four wells, HRT said.

“We are very happy with the speed of our exploration campaign in Namibia,” HRT Chief Executive Marcio Mello said in a statement.

Earlier this year, HRT said that it had started talks with potential partners to sell a stake in the company’s offshore exploration blocks in Namibia. HRT expects to complete the stake sale in the first half of 2012, with more than 20 companies showing interest, Mello told Dow Jones Newswires in an exclusive interview in April.

HRT’s U.S. affiliate opened a data room in Houston after recently completing a three-dimensional seismic survey of the company’s holdings off the coast of the West African country. Namibia holds operating stakes in 10 blocks and minority shares in two others in the Walvis, Orange and Namibe basins.

Citigroup Global Markets was hired as a strategic adviser on the sale, also known as a farm-out.

-By Jeff Fick, Dow Jones Newswires

Greg Cauthen, Transocean’s interim chief financial officer, said during an investor presentation that in the wake of public statements by the U.S. Justice Department, the company expects that “ourselves and BP and Halliburton and other employees will be indicted.” But a Transocean spokesman later said Cauthen misspoke and that the company believes it is unlikely individuals at Transocean will be charged.

Last month, the Justice Department brought the first criminal charges in the case against a BP employee.

Halliburton Co. (HAL) couldn’t immediately be reached for comment. BP PLC (BP) declined to comment.

Cauthen said that Transocean was taking the potential charges “very seriously.” Transocean is well prepared to defend itself in court, although it is also open to a fair settlement, Cauthen said.

Transocean owned the Deepwater Horizon rig, which exploded and sank in April 2010 while working for BP in the Gulf of Mexico. The explosion killed 11 men and led to the worst offshore oil spill in U.S. history.

Cauthen also said that Transocean, which has seen its profits squeezed by downtime related to equipment overhauls mandated by regulation that followed the blast, is working to have that downtime accounted for in its contracts with oil producers.

“We are negotiating improved contractual terms,” including tighter liability protections and downtime provisions for the maintenance of blowout preventers, Cauthen said. The company’s case is helped by rising demand for deep-water and ultra-deep-water rigs, Cauthen added.

In April, federal prosecutors charged Kurt Mix of Katy, Texas, with two counts of obstruction of justice for deleting from his iPhone hundreds of text messages about the spill that he exchanged with a co-worker and a contractor. Mix’s attorneys have said that the information in the messages existed in other forms that others still have and that Mix preserved, and that they have evidence they believe exonerates him.

-By Angel Gonzalez, Dow Jones Newswires

Transocean's Discoverer Clear Leader drillship

Transocean Ltd.’s (RIG, RIGN.VX) first-quarter earnings fell 86% as impairment charges again weighed on the offshore oil-driller’s bottom-line results.

Transocean, the world’s largest offshore drilling company, was the owner of the Deepwater Horizon, the rig that exploded and sank in the Gulf of Mexico in 2010, killing 11 people and setting off the worst offshore oil spill in U.S. history. Transocean still faces significant challenges as it faces potentially costly litigation with BP PLC (BP, BP.LN) and the U.S. government over the oil spill.

The company in October completed its $1.43 billion acquisition of rival Aker Drilling ASA last month, a move that expands its business into the harsher, more challenging sub-Arctic waters.

For the latest period, Transocean reported a profit of $42 million, or 12 cents a share, compared with a year-earlier profit of $310 million, or 96 cents a share. The most recent period included net losses of 52 cents a share, primarily due to impairment, while the year-ago period included 43 cents of per-share gains, primarily due to the gain on the sale of the Trident 20.

Revenue rose 8.7% to $2.33 billion.

Analysts polled by Thomson Reuters had projected a per-share profit of 33 cents and revenue of $2.39 billion.

Operating and maintenance expenses were up 3.8%.

Average daily revenue rose 2.6% from a year earlier and rose 1.7% from the prior quarter. Its fleet utilization rate was 61%, up from 55% a year ago and unchanged from the previous quarter.

Shares were up by 17 cents to $50.10 after-hours Wednesday. The stock has gained 30% so far this year.

Copyright © 2012 Dow Jones & Company, Inc.

- By ExxonMobil Connection

The ExxonMobil Drilling team this month commenced operations on the Jansz-lo driling program for the Gorgon LNG Project off Western Australia.

ExxonMobil is the Jansz-Io Work Operator and is responsible for drilling and completing the first phase of the Jansz-lo drilling program, which consists of 10 wells.

Drilling at Jansz-Io is expected to take around two years and will use ExxonMobil technology.  This technology relates to the design of the wells, and, in particular, the application of specialised techniques to allow enhanced production.  The 10 Jansz-Io wells will be drilled to a total measured depth of between 3500 and 4500 meters in water depths of 1350 meters.

ExxonMobil has signed a contract with Transocean to secure the Deepwater Frontier drillship, which underwent extensive upgrades prior to commencement of the drilling program.

Transocean operates globally with a fleet of 135 modern offshore drilling rights including drillships, semisubmersible rigs and jackup rigs.  The Deepwater Frontier is one of 36 dynamically positioned drillships and semisubmersibles operated by Transocean.

The Deepwater Frontier is 221 meters long and designed for deepwater drilling in a range of offshore environments.  It is a deepwater, dynamically positioned drillship capable of drilling to around 9,100 meters in water depths up to around 3,000 meters.

The Deepwater Frontier was inspected and upgraded prior to commencing work in Australia to ensure continued operational integrity and regulatory compliance.  A complete refurbishment and full recertification of the blow-out preventers (BOP) to Original Equipment Manufacturer standards was undertaken while BOP control systems were also upgraded for enhanced operational performance.  Improvements were also made in areas such as fire protection and power supply systems.

ExxonMobil’s knowledge and global drilling experience offer the skill and technical capability needed to undertake the Jansz-lo development drilling safely and responsibly.

The Gorgon Project is operated by an Australian subsidiary of Chevron and is a joint venture of the Australian subsidiaries of Chevron (about 47 percent), ExxonMobil (25 percent), Shell (25 percent), Osaka Gas (1.25 percent), Tokyo Gas (1 percent) and Chubu Electric Power (0.417 percent).

The audit included verifications onboard Transocean's semi-submersible rig, Transocean Arctic, currently in operation offshore Norway. Photo: Transocean

Norway’s Petroleum Safety Authority (PSA) has issued an order to Transocean Inc. to improve maintenance oversight after the authority carried out an audit of the company and the company’s system for maintenance management revealed “serious breaches” of regulations.

The audit, which focused on activity over a period from January 19 through March 1, 2012, targeted selected parts of Transocean’s maintenance management system, and how it is used and followed up in the organisation onshore and offshore.  According to a press statement from the PSA, the audit activity revealed that Transocean’s maintenance management system still did not satisfy the regulatory requirements. The activity was carried out in the form of spot checks on a random selection of equipment and documentation.

Examples of important factors identified include:

• It emerged during interviews that the new maintenance management system was not very user-friendly.
• Maintenance programs for a number of equipment units and components were missing.
• It was difficult to identify and track randomly selected equipment in RMS.
• It was unclear which method and criteria were used to assess criticality and to determine which equipment/barriers were safety-critical.
• The facility structure (the hierarchy) does not encompass all equipment in such a way that it can easily be identified in the facility, on drawings and in the PM program.
• Deficiencies in the maintenance history system.
• Performance requirements for important barrier elements were not always verified through testing and inspection activities in the maintenance system.

In addition to this, the activity revealed deficiencies in the company’s own follow-up, internal audits and completion of modification and maintenance activities.

On this basis, the PSA issued a notification of order to Transocean on 22 March 2012 and, in accordance with the notification, the PSA has issued the following order to Transocean:

“Pursuant to Section 69 of the Framework Regulations relating to administrative decisions, cf. Section 6 of the Management Regulations relating to management of health, safety and environment, Section 8 relating to internal requirements and Section 21 relating to follow-up, Transocean Offshore ltd NUF is ordered to initiate the following measures:

• Review the management system and implement measures so that the company’s follow-up systems safeguard the intended needs in all parts of the organisation. This work shall include an investigation of why important deficiencies in the maintenance system were not identified and followed up in connection with the process of implementing a new system (RMS).
• Draw up a binding plan and schedule for how this work will be carried out and followed up. This plan must be sent to the PSA by 26 April 2012, together with a response to the audit report,

SEDCO 714, via Flickr

At 1153 GMT, Total announced via Twitter that a team of 11 engineers had descended upon the stricken Elgin platform to commence “well kill” operations.  At the same time, the Transocean (NYSE:RIG) drilling rig, SEDCO 714, was spudding in the first relief well as part of the operation to stop the Elgin G4 gas leak.

The UK Department of Energy and Climate change granted TOTAL consent to drill a relief well to tackle the Elgin gas leak after a full environmental assessment.

The high temperature, high pressure well will be used to safely block and permanently seal the Elgin G4 well, the source of the current leak, should a dynamic kill operation also being planned prove unsuccessful. The Health and Safety Executive has confirmed it has no objections to this intended activity.

The relief well will be drilled from the SEDCO 714 drilling rig which will be located approximately 1.2km East of the Elgin G4 well in water around 90m deep. The anticipated vertical depth of the completed well is approximately 4,400m and will take around 180 days of drilling to complete.

TOTAL is also continuing to work with the UK government on their preferred option of a dynamic kill, that will use heavy mud to block the well.

A DECC spokesman said: “We are happy with the progress TOTAL is making to resolve this incident as quickly as possible. We continue to monitor the situation closely and the latest reports from Marine Scotland show that the impact to the environment remains minimal.”

Rowan Gorilla 5, by Vic, Tim, Finley and Freya.

LONDON ( Dow Jones ) – Efforts to drill a relief well to plug the leak seen since Sunday on a platform of Total (FP.FR) in the UK North Sea began with two drill ships already mobilized in the area and that should begin to intervene in the coming days, said Philippe Guys Friday, general manager of Total E & P UK.

The Sedco 714 and the Rowan Gorilla 5, already under contract with Total, are positioning themselves to start operations as soon as an initial assessment of the seabed has been completed, he added.

A project to “kill” the well by injecting mud runs parallel, but it should take much longer to launch because it is currently dangerous to allow employees to board the abandoned platform.

-Alexis Flynn, Dow Jones Newswires

Image via Transocean's Offshore Frontiers Magazine, July 2005

(Dow Jones) French oil major Total SA (TOT, FP.FR) may hire Transocean Ltd. (RIG, RIGN.VX) and Rowan Cos. (RDC) to drill relief wells to end an ongoing gas leak at its Elgin platform in the North Sea, a person familiar with the situation said Tuesday.

Total has said it is studying all options including drilling a relief well to end the leak. A spokesperson said a decision hasn’t yet been made on whether to drill a relief well and noted it could take time to do so. The company said it is flying in international experts to assist in addressing the issue.

However, the proximity of vessels owned by the two firms to the affected Elgin site may sway Total’s decision.

Transocean’s Sedco 714 semisubmersible rig is on contract to Total for work in the North Sea, while Rowan has a jackup rig that was used at Elgin to do intermittent drilling work.

Shares in Paris’s Total fell 6% Tuesday after the company said it was studying many options including the time-consuming operation of drilling a relief well to intercept the leaking borehole and seal it with cement.

After its Gulf of Mexico oil spill in 2010, BP PLC (BP, BP.LN) took three months to drill a relief well under similar reservoir depth and pressure conditions to the ones Total could face at Elgin.

Total has rejected comparisons with BP’s Macondo well blowout, which killed 11 men and spilled tens of thousands of barrels of oil a day from the seabed.

Total has said it believes the gas at Elgin is leaking on the platform, having originated from a zone of rock above the main reservoir. The leak comes from a well known as G4 that was plugged about a year ago.

Tuesday’s decline in Total’s shares amounted to their biggest one day drop since late 2008. Analysts warned there was still considerable uncertainty around the situation.

“A best case is that the leak stops naturally within a number of days,”Sanford C. Bernstein & Co. said in a note to clients. “The worst case is that Total is forced to drill a relief well.”

-By Alexis Flynn of Dow Jones Newswires and Tom Fowler of the Wall Street Journal

The executives have been stripped of their passports and told not to leave the country. “The managers appear to have foreign citizenship or financial conditions and clear motives to want to leave the country,” Costa Magalhaes said in his order. Their departure “at this time and under the current circumstances, would pose great risk to the investigation and the eventual application of the criminal law,” the judge said. But this is not a typical response for such an incident. “I’ve never seen a spill this small with this size of reaction,” Ali Moshiri, who is in charge of Chevron’s Latin America operations, told The Wall Street Journal in late 2011.

The executives “appear to have foreign citizenship or financial conditions and clear motives to want to leave the country,” Costa Magalhaes said in the order. Their departure “at this time and under the current circumstances, would pose great risk to the investigation and the eventual application of the criminal law,” the judge said.

According to the New York Times, Brazilian news media have criticized George Buck, the head of Chevron’s Brazil operations, after he and Mr. Moshiri were summoned to Brazil’s Congress to discuss the spill, questioning why Mr. Buck relied on a translator instead of speaking Portuguese. Now Mr. Buck, an American, is barred from leaving Brazil, and a lengthy legal battle awaits him and other employees at Chevron and Transocean.

Judge Magalhães issued his ruling prohibiting the departure of the 17 Chevron and Transocean employees at the request of a federal prosecutor. “There is no doubt the exit of these people from the country, at this moment, would generate considerable risk to the investigation,” the judge said. Prosecutors said the criminal charges in connection with environmental crimes could result in prison terms of 20 years for each defendant.

The executives “appear to have foreign citizenship or financial conditions and clear motives to want to leave the country,” Costa Magalhaes said in the order. Their departure “at this time and under the current circumstances, would pose great risk to the investigation and the eventual application of the criminal law,” the judge said.

The Frade oil field, which lies in deep waters off the coast of Rio de Janeiro, was producing about 79,000 barrels a day at the time of last year’s oil spill, according to Chevron.

An oil sheen from the Frade OIl Spill offshore Brazil

RIO DE JANEIRO (Dow Jones)–A federal judge in Brazil denied an injunction to suspend the local operations of U.S. oil major Chevron Corp. (CVX) and rig operator Transocean Ltd. (RIG, RIGN.VX), saying that the injunction would have punished the companies before they had a chance to defend themselves in court.

A federal prosecutor had asked for the injunction in the wake of a November oil spill at the Chevron-operated Frade field offshore Brazil. A drilling accident caused an estimated 2,400 to 3,000 barrels of crude oil to seep into the sea from cracks in the seabed. The injunction was part of a 20 billion Brazilian reais ($11.8 billion) civil suit filed against the two companies in December.

“The risk of new accidents should be real and imminent, not merely hypothetical,” Judge Raffaele Felice Pirro said in his decision. Absent evidence that the two companies activities represented a real and imminent danger to society, the injunction couldn’t be granted, the judge said.

A federal court official said that the civil lawsuit would continue, although it is unclear whether the federal prosecutor could seek another injunction or appeal the judge’s ruling.

“We welcome the judge’s decision to deny an injunction and we will continue to cooperate with the authorities,” Transocean said in an emailed statement. Chevron officials weren’t immediately available for comment.

The drilling accident Nov. 7 caused an oil spill at the Frade oil field, which lies in deep Atlantic waters off the coast of Rio de Janeiro state. Frade was producing about 79,000 barrels a day at the time of the accident, according to Chevron. Regulators have already requested that one of the company’s 10 production wells and four water-injection wells be closed because of the presence of hydrogen sulfide gas.

Transocean operated the rig drilling the well that caused the accident.

Chevron is lead operator of Frade, which holds estimated recoverable reserves of between 200 million and 300 million barrels of oil equivalent, with a 51.7% stake. Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, holds 30%, while the Frade Japao Petroleo Ltda. consortium has the remaining 18.3% share.

The federal prosecutor, Eduardo Santos de Oliveira, said in filing the lawsuit that he found that Chevron and Transocean “weren’t able to control the damage caused by the spill of nearly 3,000 barrels of oil, which shows a lack of planning and environmental management by the companies.”

Chevron so far has been fined $28 million by environmental regulators, but that total is expected to climb as the investigation into the oil spill evolves. In addition, Brazil’s National Petroleum Agency, or ANP, has issued three infractions against Chevron related to the spill that each carry a possible maximum fine of $28 million.

-By Jeff Fick, Dow Jones Newswires