Ole Slorer Paulo Loureiro Igor Levi Oil Services, Drilling

May 2, 2010

Oil Services, Drilling & Equipment Deep Dive into the Deepwater Horizon Incident

We held a conference call with four industry experts and have concluded that CAM, SII, RIG and HAL have limited financial liability in the tragic incident and recommend investors buy on weakness. CAM and SII have the least to worry about, given the BOP was past warranty and the drilling contractor (RIG) is responsible for its maintenance, while the operator (BP) is in charge of determining the mud density appropriate to use in a given wellbore. HAL also has relatively limited exposure because investigating the cement plug, if it had even been installed, which the company denies, would be very difficult. RIG is responsible for the fuel leaking out of its unit, but likely is contractually protected from any environmental liability resulting from a blowout. We expect RIG’s $1bn insurance policy to cover the majority of liabilities resulting from diesel spill from the unit and loss of life.

We see potential regulation as a positive for the drilling equipment industry, benefitting CAM and NOV, as drilling rigs may require more redundancy of equipment, as well as more frequent servicing and replacement of equipment. On the drilling side, we expect established offshore drillers with the newest deepwater units to benefit as demand for their rigs is likely to increase, which includes SDRL, ESV, and PDE, while DO is likely to be disadvantaged given its older fleet and very high exposure to the Gulf of Mexico.

We have included the transcript from the call as an appendix to this report. Replay of the call is available until May 14 (please see right hand side for details). Please see p. 7 for a list of additional resources, including company press releases regarding the incident.

Morgan Stanley appreciates our clients' support in Institutional Investor's 2010 All-America Research Team survey. To request a ballot, please email [email protected] and ask for the ALL-AMERICA RESEARCH TEAM survey.

Table of Contents Incident, Fallout, Implications for Stocks Incident: Background and Conflicting Accounts Page 2 What is a Blowout Preventer? Page 3 Survivors’ Accounts of the Incident Page 4 Fallout: Liability, Future for Offshore Drilling Page 4 Implication for Stocks and Industry: CAM, SII, RIG, HAL Page 6 Additional Resources Page 7 Biographies of Our Industry Experts Page 8 Conference Call Transcript Page 10

Replay Information (available until May 14) US Dial-In Number: (888)-286-8010 International Dial-In Number: (617)-801-6888 Passcode: 76732103

Follow-up Conference Call The Deepwater Horizon situation is developing at a rapid pace. Therefore, we plan to hold a follow-up call with our experts next Friday, May 7, to provide an updated view of the situation as it unfolds and we learn more. Details to be distributed when available.

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

Morgan Stanley & Co. Incorporated Ole Slorer

[email protected] +1 (1)212 761 6198

Paulo Loureiro [email protected] +1 (1)212 761 6875

Igor Levi [email protected] +1 (1)212 761 3232

M O R G A N S T A N L E Y R E S E A R C H N O R T H A M E R I C A

Industry View Attractive

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M O R G A N S T A N L E Y R E S E A R C H

May 2, 2010 Oil Services, Drilling & Equipment

Conference Call with Experts on the Deepwater Horizon Incident Incident, Fallout, Implications for Stocks On Friday April 30, we hosted a conference call with several industry experts for a technical, legal and political discussion on the Deepwater Horizon incident. We brought together a 15-year Transocean veteran; an Oil Pollution Act litigation expert; a former US Government career attorney with over 27 years experience dealing with Ocean Policy; our Capital Alpha political consultants; and Morgan Stanley equity research analysts (see p. 8 for bios).

We focused on three key topics, including (i) potential scenarios regarding how the accident occurred, (ii) legal and political fallout from the incident, and (iii) outlook for the companies involved – especially HAL, RIG, CAM and SII (through M-I SWACO, a 60%/40% JV between SII and SLB). We learned that contractual protections likely provide legal cover for CAM and RIG, while legal contracts and the practical difficulties of investigating the incident likely limit exposure for SII and HAL. Even though there are conflicting accounts as to the cause of the accident, our goal is to provide the context necessary to understand future developments.

The Incident

On April 20, a massive explosion on RIG’s Deepwater Horizon killed 11 of the 126-person crew in the Gulf of Mexico. A raging fire blazed for ~36 hours, until another blast sank the rig on April 22. The blowout preventer (BOP) apparently failed to activate, which would have shut off the well. The tragedy took a turn for the worse as the well began to leak oil at a rate officials currently estimate of ~5,000 b/d (though some reports indicate the leak may be as high as 25,000 b/d). The rig had discovered oil, after drilling BP’s Macondo well located in 5,000 feet of water, at a depth ~18,000 feet below the seabed. The rig was ~40 miles offshore Louisiana when the incident occurred. BP operates the well and owns a 65% stake; partners include Anadarko (25%) and Japan’s Mitsui (10%). RIG was the drilling contractor, HAL performed cementing operations, M-I SWACO handled drilling fluids and CAM manufactured the BOP purchased for the rig approximately 10 years ago.

What Happened?

Conflicting reports from industry contacts and survivors make it difficult to know the precise chain of events leading to the accident. In this section, we will relay the story in three parts: 1) background that does not have conflicting reports, 2) opinion

from our industry experts and other contacts, based on their first-hand interviews with survivors, on the final sequence of events, and 3) alternative reports from industry contacts and companies involved that conflict with our description in Part 2.

Deepwater Horizon on Fire

Source: US Coast Guard/Reuters

1) Preliminary Background Leading Up to the Explosion

The rig Deepwater Horizon was known as a state-of-the-art unit with a highly professional and experienced crew and a long track record of exemplary safety. HAL had apparently completed cementing the final production casing string ~20 hours prior to the explosion, and had performed tests that demonstrated the integrity of the final production casing string. Several reports agree that the next step would have been to seal off the well using cement plugs, a standard practice that would then allow BP to temporarily abandon the well and return at a later date. Whether HAL had installed the final cement plugs by the time of the explosion is where accounts of the incident diverge.

2) Reports of Events Causing the Explosion

One possible scenario leading to the explosion is based on accounts from industry contacts and survivors. These accounts claim that the cement plugs had already been installed to seal the well; this is the primary conflict with other reports. In this case, the crew would have been finished working on the well, and therefore would not have been monitoring it to the same extent as during the drilling phase. This would explain reports from survivors that the explosion came as a sudden surprise; otherwise, personnel monitoring the safety and integrity of the well likely would have had some warning that hydrocarbons were heading to the surface and

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would have been able to manually trigger emergency systems to shut down the well.

Why the blowout preventer may not have worked? A potential scenario: Although the crew would not have actively monitored the well at this stage (because the well was plugged), other safety systems would still have been in place. Notably, it seems the blowout preventer (BOP) was not closed, which is a major point of ongoing and future investigations, in our view. This could have been from electrical or mechanical failure, or simply from the lack of any crew action to close the BOP. Though it is possible to manually trigger the BOP, it is likely that the explosion killed everyone on the drill deck, which explains why nobody there tried to manually activate emergency shut off systems. When hydrocarbons reached the surface, the massive explosion could have knocked out communications between the rig and BOP, preventing the remote emergency shut-off signal from triggering the BOP’s massive rams to slam the well shut. Hydrocarbons would then have flowed unimpeded up from the well, literally fueling the raging fire that ultimately sank the rig.

3) Alternative Conflicting Accounts

One of the main divergence in reports is whether the cement plugs had already sealed the well shut. HAL released a statement on Apr-30 corroborating that it had completed cementing of the final production casing string ~20 hours before the explosion, but disputing that the cement plugs had been put in place. This is in line with accounts from other industry contacts, who claim that the rig was still preparing for the final phase of sealing the well. In this case, it is possible that a loss of drilling fluids had occurred, but was being obscured by an expanding gas bubble. If loss of pressure allowed hydrocarbons to escape up the drill pipe quickly without being noticed, the explosion would have caught the crew by surprise, which corresponds to survivors’ accounts. Again, the explosion would have instantly destroyed communication lines between the rig and the BOP, and anyone in a position to manually trigger the BOP on the drilling deck would likely have been killed by the explosion.

What is a blowout preventer and how does it work?

A blowout preventer (BOP) is an emergency shut-off device that slams a well shut in the event hydrocarbons enter the wellbore and threaten the rig. This BOP had five massive rams that slam the well shut when the system is triggered by an electronic signal from the rig. A BOP is comprised of several individual units, or a “stack”. Some units in a stack have powerful shearing rams, designed to rip straight through the steel piping to fully seal the well bore.

Some shear rams are equipped with an "auto-shear" function, or "deadman's switch". This is intended to cause the shear rams to close under certain circumstances, and it can also be designed to function with loss of control signal, or loss of control and external hydraulic pressure. However, for the rams to function at all they need stored hydraulic pressure in pressure vessels much like scuba tanks strapped to the frame of the BOP.

The Deepwater Horizon is reported to have had the auto-shear function, but the shear rams clearly did not fully close. ROV's have been used to try to pump the shear rams closed, which indicates the BOP is not closed but should be functional. So far, these efforts have not worked. Assuming reports that the explosion was a complete surprise are correct, it is likely control of the BOP was lost before any crew-initiated action to close it took place. The remaining question, then, is why the auto-shear function did not close the shear rams?

Blowout preventer

Source: deepwaterhorizonresponse.com

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Survivors’ Account of the Incident

Account 1

BP executives arrived on the rig that morning to present a 7-year safety award; they were there for an overnight visit. The witness went to the drill floor just prior to the incident, and reports the crew was getting ready to cement the casing in. He said something did not feel right, so he went to the SSE office.

There was an initial explosion, then the hiss of the gas, which instantly filled the accom. and all spaces.

When he opened the door from his room, he saw a gas cloud coming straight at him. The cloud then retracted. Next came a bigger explosion – the mud pumps blew completely out of the rig, the turbos on the generators sucked in the gas, and the explosion blew everyone in the room out of the back and completely into the water.

Forward lifeboats were launched, and other men were jumping from wherever they could jump from. The sack room blew completely into the accom. The accom walls were completely blown apart – you could see all the way through the previously enclosed structure; there was not a wall left standing.

The fire raged, and the life rafts began to melt from the heat. The N2 bottles blew as a separate explosion, and the tote tanks were reaching boiling points and exploding.

Account 2

This eye witness explains that a small gas bubble comes from high compression of 8,000 psi at a depth of 10,000 feet below the sea floor to ~0 psi at the surface. It expands like a jet plane that is out of control.

The witness had been on the rig floor just before the gas cloud hit the surface. It exploded within moments of arrival. The mud pumps were blown completely off the rig and into the sea. The generator turbines sucked gas and also exploded. Clearly no one survived in key areas to manually activate BOPs or any other alarms or safety devices.

The Fallout

The accident claimed 11 lives, sank a rig, caused a major oil spill and potentially damaged fragile environments; the question that we are looking to answer is who will potentially share in the financial liability. Given the scope of the oil spill, which aside from causing major pollution may disrupt fisheries, shrimp farms and other industries along the coast, we are unable to determine the cost with certainty.

However, our experts indicate that the oil company (BP) is responsible for taking charge of the spill response, while determination of liability will be based largely on contracts between the companies. We focus on four key topics: 1) the division of liability between the oil company and the offshore driller, 2) the division of liability between the driller and the BOP manufacturer, 3) liability exposure of services companies, and 4) the political implications of recent statements made by government officials.

Current State of the Horizon Response

Source: BP

1) Liability between the Oil Company and Driller

The liability attributed to the operator (BP) and the drilling contractor (RIG) is determined by the original contract signed between the two parties. Typically, each party is responsible for its own people; the drilling contractor is responsible for the rig and any pollution coming directly from the rig; and the oil company is responsible for any pollution resulting from the well.

Drilling contractors are particularly sensitive to three key clauses, and write contracts in such a way that liability lies with the oil company for (i) pollution due to oil coming from the well (i.e. a blowout), (ii) reservoir damage, and (iii) loss of production. The language typically specifies that the oil company will protect, indemnify and defend the contractor in these cases. Sometimes, the contract goes as far as saying that the contractor cannot be held responsible even if the event is a result of negligence, gross negligence, or willful misconduct. However, other times the contract states that in the case of gross negligence or willful misconduct, the driller may be held liable, though liability is often capped at ~$10m.

2) Liability between the Driller and the BOP Manufacturer

The blowout preventer (BOP) is generally purchased while the rig is still being constructed, and usually comes with a

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short-term warranty (roughly one year or so). Given that the Deepwater Horizon was built in 2001, the warranty is almost certainly no longer valid. The BOP is part of the rig, so the drilling contractor is responsible for regularly pressure testing and maintaining the unit, as well as replacing parts as needed. The contractor often uses a third party to perform such maintenance; in this particular case, we believe the company providing the maintenance was not the manufacturer (CAM). The only scenario in which we could envision the BOP manufacturer being held liable is if it turns out there was a latent defect that had not been previously known. We believe this scenario is highly unlikely because the BOP had been tested repeatedly and CAM has a reputation for supplying high quality BOPs. Therefore, if BOP failure caused the incident, our experts believe responsibility probably lies with the drilling contractor (RIG), not the BOP manufacturer (CAM). However, our experts point out that the BOP may have been fully functional, but the initial explosion could have disabled the BOP’s controls and severed the electrical communications cable, in which case BOP failure would have been a consequence, rather than a cause, of the explosion.

3) Liability Exposure of Other Services Companies

If the well had been sealed with cement plugs (which HAL, the company responsible for cementing, disputes), the blowout may indicate there was a problem with the cementing mixture that prevented the well from sealing properly. Setting cement at these depths is a balancing act, requiring highly experienced engineers to calculate just the right mixture and density to address the unique challenges of that particular depth and terrain. Though services companies, like drilling contractors, typically have substantial contractual protections from liability, these protections may be weaker if the cementing was performed improperly.

Separately, one function of drilling fluids (handled by MI-SWACO) is to equalize pressure during drilling, thereby preventing release of hydrocarbons. Like cementing, determining the correct mix for drilling fluids requires highly experienced, expert engineers to balance unique challenges of a particular assignment. While it is possible that an incorrect mixture for drilling fluids could have created problems leading to the blowout, our experts believe this is unlikely given that MI-SWACO’s engineers were highly experienced and it is fairly easy to test drilling fluids throughout the process to ensure they have the right density. Further limiting liability of the services company, it is the operator’s (BP) engineers that determine the appropriate mud for the well.

4) Political Implications for Offshore Drilling in the GoM

Last week, David Axelrod, White House Senior Advisor, said that there would be no new offshore drilling until we find out what happened to the Deepwater Horizon. We believe the market widely misinterpreted this to mean that no new contracts would be awarded to drilling rigs, or even that currently drilling rigs must stop working. Our experts, on the other hand, believe Axelrod was referring to Obama’s recent announcement regarding plans to open entirely new territories to offshore drillers. Our experts believe it is extremely unlikely that Axelrod meant the government would revoke existing permits, as unilaterally revoking permits would violate existing contractual rights of oil companies, causing substantial legal problems for the government. Rather, the government has announced that all existing rigs in the Gulf of Mexico will undergo inspections.

Map of the Oil Spill

Source: NOAA

It is possible, however, that the MMS may delay upcoming lease-sales. The next lease sale is the Western Gulf of Mexico Lease Sale 215, scheduled for August 18. While delaying the lease-sale is an incremental negative, the lease sale would not usually translate into drilling activity for several years, especially in the case of deepwater drilling. At the same time, Obama’s plan to open up new areas to offshore drilling likely would take at least four-years before we would see activity in these newly opened regions, so near and medium term consequences of a delay would be minimal.

While we do not expect drilling to come to a halt, our experts believe it is likely that we will see stricter technology regulations. When the Exxon Valdez oil spill occurred 20 years ago, new regulations were adopted requiring companies to phase out single hull tankers and replace them with double hull tankers. In addition, our experts believe we may see higher royalties (in

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the context of royalty hikes and increased fees already being planned), requirements for additional redundancy in safety systems, and requirements for newer equipment and more frequent testing and servicing.

Implications for Stocks and Industry

Our conclusion is that the operator and the other lease interest owners will absorb the lion’s share of the financial liability for the oil spill and any potential punitive damages. We expect the following outcome: 1) CAM and SII to be fully absolved of liability; 2) RIG’s potential liability to be relatively small and well within insurance policy; 3) HAL unlikely to be held responsible, as the company claims it had not plugged the well, and even if it had plugged the well it would be extraordinarily difficult to demonstrate flaws with the cement; 4) industry wide implications to be a long term positive for equipment manufacturers and somewhat mixed for offshore drillers; and 5) impact on shipping lanes in the Gulf to trigger a congestion-like effect on tanker rates.

1) We Expect No Liability for CAM and SII

CAM’s Role Given that the rig was built in 2001, the purchase decision for the BOP would have been made even earlier, making the BOP ~10 years old. The BOP’s relatively short warranty has almost certainly expired by now. The BOP is considered part of the rig, and therefore it is the drilling contractor’s responsibility to test and maintain it. The only situation where we believe CAM could have liability is if there was a latent defect in its design. Our experts believe this is highly unlikely because the device would have been frequently tested and maintained.

Additionally, because the explosion occurred without warning, the BOP may have quite possibly failed because the blast instantly severed the controls and electrical wires connecting the rig to the BOP.

SII’s Role With regard to SII’s role (through MI-SWACO) in the incident, it is a remote possibility that improper mud density caused a loss of hydrostatic pressure. However, if this is the case, our experts still believe it is unlikely SII would bear any liability. If the well had been plugged, the mud already would have been removed and so SII would no longer have been operationally involved with the well. In this case, the improper mud density would not have caused the blowout. If HAL had not installed the cement plug yet and the wellbore was still open, the oil company (BP) engineers are responsible for determining the appropriate mud consistency for the wellbore. As a result, our

industry experts do not see a scenario where SII could ultimately be held liable.

2) RIG Liability is Limited and Insured

The drilling contractor, RIG, was responsible for maintaining the equipment on its floater, including the BOP. However, even if the equipment did fail, we believe that its contract with the oil company likely limits RIG’s liability. Insurance would further mitigate any liability RIG does have under its contract. Contracts between oil companies and offshore drillers typically absolve the driller of any environmental liability that results from oil leakage following a blowout. As mentioned earlier, the oil company is often required to protect the drilling contractor, and even in cases of gross negligence or willful misconduct, the contract usually caps potential liability at ~$10m.

RIG is responsible, however, for any fuel spilled directly from its floater and for the injury or death of its employees. We believe insurance coverage should be more than sufficient to handle these expenses. The rig itself was insured for its replacement value of $560m, while potential liabilities are covered by its blanket policy of $1bn with a $50m deductible. Even losses up to the $50 million deductible would be small relative to RIG’s ~25 billion market cap.

3) HAL Not Likely Liable, Hard to Prove Otherwise

While reports diverge on whether or not the well had been plugged, we believe that either way HAL’s exposure to liability is relatively low, despite the vast amount of negative press. Similar to drillers, we expect contracts to relieve service providers of environmental liabilities resulting from a blowout. While we have not seen this in writing, no one from our panel of experts could recall a single case where a service provider was held responsible for environmental damage from a blowout. If the well had not been plugged, then improper cementing could not have caused the blowout. If the well had been plugged, we believe that it would be nearly impossible to demonstrate that HAL had improperly performed the cementing because the explosion would have blasted the cement plug to bits and scattered its remains across miles at the bottom of the ocean, making retrieval and analysis next to impossible.

Friday afternoon, the US House Committee on Energy and Commerce, chaired by Rep. Henry Waxman (D-CA), expanded its investigation of the incident to include the role HAL played installing the cement plug. Nonetheless, we believe HAL’s potential exposure will play out as indicated above.

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4) Implications for Equipment Names and Offshore Drillers

Positive for CAM and NOV: We see positive implications for names providing drilling equipment such as CAM and NOV, as we may see regulations requiring redundancy of equipment and higher frequency of servicing and replacing equipment, which would increase the size of the potential market. We may even see new products deployed, such as CAM’s 20K BOP, which we first saw last year during the Offshore Technology Conference, which could drive sector-wide revenues higher.

Positive for drillers only with newer equipment: Potential regulation may require newer equipment, especially for deepwater rigs, which would be positive for SDRL, ESV, and PDE and negative for DO, who not only has the oldest floater fleet, but also has the greatest floater exposure to the Gulf of Mexico, where stricter regulation is most likely to be enforced. Additionally, any potential halt to new lease-sales in the GoM would be negative for the industry over the medium term, especially for drillers with rigs in the region. DO has the most exposure followed by RIG, while PDE, SDRL, ATW have almost none.

5) The Deepwater Horizon incident will also impact shipping channels in the Gulf, in our view

The oil spill could move rates higher in anticipation of delays. For now, the problem is limited around the port of Pascagoula, making movements of Panamaxes and Aframaxes difficult. A potential closure of the Mississippi River could freeze inland supply causing a spike in smaller tanker rates. The most significant port – Louisiana’s LOOP – has yet to be affected and crude supply is sufficient to meet refining runs. VLCCs should experience a couple of day’s worth of delays from the deviation of their voyage due to the security zone established by the US Coast Guard. We estimate that this deviation will increase the time of Middle East round-trip voyages by two days. If the spill eventually impedes shipping lanes there, we would see an immediate cut in available supply of VLCC and Suezmax vessels, thereby triggering a congestion-like effect on tanker rates. The spill can also spur tighter tanker regulation in the US. Though a dwindling amount of tankers still use single hulls, these vessels are still permitted to operate in US waters until 2015 under OPA 90. The oil spill disaster helps accelerate the ban on single-hull vessels in the US. This would help make the long-term supply outlook for tankers more favorable.

Additional Resources We have provided a list below of additional resources relating to the Deepwater Horizon incident.

Deepwater Horizon Response Website, (official response website jointly run by the US Department of Homeland Security, the National Oceanic and Atmospheric Administration, the US Department of the Interior, BP and Transocean) http://www.deepwaterhorizonresponse.com/go/site/2931/ RIG Transocean Response Site http://www.deepwater.com/fw/main/Home-910.html

BP Website http://www.bp.com/bodycopyarticle.do?categoryId=1&contentId=7052055

HAL Press Release 4/30/2010 http://www.halliburton.com/public/news/pubsdata/press_release/2010/corpnws_043010.html

ESV Press Release 4/30/2010 http://phx.corporate-ir.net/phoenix.zhtml?c=105001&p=irol-newsArticle&ID=1420790&highlight=

US House Committee on Energy and Commerce http://energycommerce.house.gov/

Senate Energy and Natural Resources Committee website http://energy.senate.gov/public/

US House Natural Resources Committee website http://resourcescommittee.house.gov/

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Biographies of Our Industry Experts

Mike Smith Mike Smith is the President of Bassoe Offshore (USA), an offshore rig brokerage firm engaged in sale and purchase, chartering and new building support for offshore drilling rigs such as drillships, semi-submersibles and jackups used in shallow and deepwater, international and domestic drilling operations. He has over 30 years of experience in the Offshore Oil sector. He has both bachelor and master's degrees in engineering with years spent overseas in Japan and Korea shipyard project management for major driller Transocean. He also has an MBA and more recent experience in rig contracting and business development. Mr. Smith's last 15 years of transaction facilitation work as a Broker which has provided him a broad understanding of the drilling industry, the assets employed therein, and market trends.

Steven Candito Steven Candito is President at National Response Corporation (NRC) and NRC Environmental Services (NRCES). NRC is a commercial spill response organization in the United States and NRCES is an environmental contracting firm on the US West Coast. Previously, Mr. Candito was Vice President and General Counsel at NRC where he was responsible for client services, administration, and legal affairs. He was also a Shipboard Engineer aboard Exxon USA’s domestic tanker fleet and an attorney at Haight Gardner Poor & Havens, where he was responsible for maritime litigation and environmental law. Mr. Candito has experience in Oil Pollution Act of 1990 matters and related insurance issues. Jack Coleman Jack Coleman is Managing Partner of EnergyNorthAmerica, LLC, a Washington, DC energy consulting firm. Previously Coleman was a career attorney with the United States Government for 27 years dealing with Ocean Policy. For 11 years, Coleman was Senior Attorney for Offshore Minerals representing the Interior Department’s Minerals Management Service (MMS), which runs the nation’s offshore oil and gas program. On Capitol Hill, Coleman was General Counsel for the House Natural Resources Committee for two years and Energy and Minerals Counsel for four years. Coleman has extensive experience in all aspects of offshore oil leasing, permitting, safety regulation, and environmental law. Coleman has litigated on behalf of the United States Government on offshore oil and environmental matters in every major forum. Coleman is one of two Managing Directors (together with his partner Jack Belcher) of the National Ocean Policy Coalition. He has also played a role in drafting most major energy bills since, and including, the Energy Policy Act of 2005.

James Lucier James Lucier is Managing Director of Capital Alpha Partners, LLC, a Washington, DC political risk advisory firm. He specializes in the fields of energy and environment, climate, tax, and technology policy as well as diverse special situations. Lucier brings the benefit of over 25 years’ experience in Washington to his forecasts for institutional investors. For most of his nine years at Prudential Equity Group, he was a senior vice president and research analyst working with both the investment strategy teams and the sector-specific research teams covering electric utilities, primary energy industries, industrials, and information technology companies. Earlier, in the policy world, Lucier held a wide range of positions as an analyst, lobbyist, issues manager, political strategist, and business development consultant. His work integrates technical expertise with deep insight into the process and institutions of Washington. Lucier frequently appears as a speaker at industry conferences and a commentator in the financial press.

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Thank You for Voting Institutional Investor At Morgan Stanley, we are endeavoring to provide leading coverage and analysis of the Deepwater Horizon incident with the goal of enhancing our clients’ understanding of this rapidly evolving situation. We will keep you apprised with updated analysis as events unfold and we learn more.

This is an ongoing joint effort of the Morgan Stanley Energy Equity Research team. For your convenience, we have listed the below the analysts involved and their respective coverage industries.

Ole Slorer • Global Head of Energy Research • Global Oilfield Services, Drilling & Equipment • Global Shipping

Paulo Loureiro • Global Oilfield Services, Drilling & Equipment

Evan Calio • Integrated Oil

Stephen Maresca • Midstream Energy MLPs

Stephen Richardson • Exploration & Production

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Conference Call Transcript The following is a transcript of a recent conference call with the following: (i) Mike Smith, President of Bassoe Offshore (USA); (ii) Steven Candito, President of National Response Corporation and NRC Environmental Services; (iii) Jack Coleman, Managing Partner of EnergyNorthAmerica, LLC; and (iv) James Lucier, Managing Director of Capital Alpha Partners, LLC. Please note that these individuals are not members of Morgan Stanley’s Research department. Unless otherwise indicated, their views are their own and may differ from the views of the Morgan Stanley Research department and from the views of others within Morgan Stanley. We make no claim that their representations are accurate or complete.

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Transcript MORGAN STANLEY: DEEPWATER HORIZON INCIDENT April 30, 2010/11:00 a.m. EDT SPEAKERS Ole Slorer – Oil Services Analyst, Morgan Stanley

Mike Smith – Transocean

Jack Coleman – U.S. Attorney

Steven Candito

Jim Lucier – Alpha Group

PRESENTATION Coordinator Good day, ladies and gentlemen, and welcome to the Deepwater Horizon Incident conference call. AT

this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ole Slorer, Oil Services Analyst at Morgan Stanley. Please proceed.

O. Slorer Thank you very much. This is Ole Slorer and I’m here with Paulo Lorello and, clearly, yesterday was a busy day for us. We had 11 companies reporting earnings and this phone was pretty much ringing off the hook the whole day. Clearly, everybody is now focusing on the implications of what’s going on in the Gulf of Mexico, a very tragic accident.

What caused it? Where do the liabilities lie? Who is responsible? So, I think this conference call is probably something that should hopefully clarify a few of these issues.

With us on the call today we have Mike Smith. Mike has been with Transocean for 15 years and everything that became Transocean. He’s involved in negotiating contracts, negotiating what goes into the liability clause, what is not; a very good understanding of where the ultimate responsibility lies from what spilled from a vessel, relative to what comes out of the ground.

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And then we have Jack Coleman, who is an Attorney with the U.S. government and has been dealing with the ocean policy. And then we are going to talk with Steven Candito, who has been on a tanker earlier on with Exxon at the time of Exxon Valdez.

I think this is particularly interesting because Exxon Valdez was the precursor to a much stricter regulatory environment on tankers and this is the last year, 2010, when we can sell single hold tankers as a result of this incident and the Oil Pollution Act of 1990.

What I find most fascinating about the OPA 1990 was that it was effectively a brand new ship with a drunken captain, who then rammed the ship onto a rock and as a result of that there was a rule that you had to sail in brand new ships. So, it’s a completely illogical result of another very tragic incident. But it shows how Washington can react, sometimes, in very mysterious ways.

So the implications of this I think will be very interesting to debate. And then we have Jim Lucey, of course, who most of you know with Alpha Group.

I think we’re going to kick it off here with Mike Smith to give us a ten to 15 minute overview of what goes into the contract, what could have gone wrong on this, why wasn’t BOP working, and address the issues around BP, Transocean, Halliburton, Cameron, High Drill, Schaeffer, Schlumberger, MI involved in the fluids. I mean, who is to blame here? And, Mike, can you kick it off, please.

M. Smith Yes, thanks, Ole. To start off maybe we’ll talk about the traditional terms of a drilling contract between the contractor, Transocean, and the operator or their customer, BP. A contract like this might go 80 to 100 pages, but the key elements of the contract are really about blowout pollution.

And throughout the drilling industry it is true today and it’s always been true with very few exceptions that the drilling contractor takes responsibility for all of his people and for pollution that emanates from the rig. That is, if he dumps oil or oil-based mud overboard that he’s in control of on the deck.

But the oil company always takes responsibility for blowout cratering seepage or oil that comes from the sea-bed, a blowout. You know the normal language would say that the oil company will protect, indemnify and defend the contractor and sometimes it goes so far as to say regardless of cause, including negligence, gross negligence or willful misconduct.

But it’s a limited area where things start to diverge a little bit. An oil company may, if he has negotiating leverage put some responsibility on the drilling contractor in the case of his gross negligence or willful misconduct and that will normally be capped, maybe $10 million or something more. But the drilling contractor will never accept unlimited liability for pollution from a blowout, which is clearly what this is.

The cause of it is going to be a matter of some great discussion, but these are hydrocarbons coming from the reservoir or from the sea-bed.

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From what I’ve heard from different people in the industry what was happening here was this was BP’s Macondo prospect. It was an exploration prospect. This was a discovery well. They discovered a lot of oil. It’s about 5,000 feet of water. It was planned to be drilled about 18,000 feet total depth and they were about total depth.

The details start to diverge a little bit, but some things that I’ve heard are that they had cemented the last casing string successfully. They were experiencing some loss circulation problems prior to this, but that’s not uncommon in the Gulf of Mexico deep water and it’s just that geology is such that the weight of the mud has to be very carefully controlled or the mud seeps off into the rocks and the sedimentary areas around the wellbore if it gets too heavy and if it gets too light, then you have the risk that the wellbore fluids, the reservoir fluids come into the wellbore and start to come up, which is called a kick.

If that happens uncontrollably, it comes to the surface, then you have what’s called a blowout. In any case, my understanding from talking to other people, and not Transocean, because unsurprisingly Transocean people have been advised by their internal lawyers not to talk to anybody about this, but what we hear is just gossip from other drillers and people in the industry is that the well had been basically drilled to total depth.

The last casing string had been cemented in and here the story diverges a little bit. One story I hear is that they had made the discovery, were planning to keep the well as a possible future producer in a future but yet unplanned development from Macondo and so they set cement plugs inside of the casing, which you do in order to temporarily abandon the well. You pump cement in along sections so you essentially seal off the reservoir. It’s cased with steep pipe. It’s all cemented into the ear and then you put cement plugs inside of the pipes to seal it off.

Then they were tripping the pipe out of the hole or recovering the drill string, which was inside the drilling riser, and it was a surprise to the people on board the rig when suddenly this explosion happens completely unpredicted. Some indications are that because they had cemented off the wellbore they no longer were monitoring some of the things you would monitor if you were circulating mud and expecting that there might be an influx of reservoir fluids.

What could this mean? Well, maybe no one tried to close the BOP because the thing just came in. If there were cement plugs in the wellbore and the cement plugs failed, then maybe there was an issue with the cementing. But all this is very fuzzy because nobody knows really what happened.

It doesn’t seem like this was a case of normal drilling the head and lost control of the well. In fact, it would surprise me if that was the case because there are a lot of safety systems in place. One of the key safety systems is you have a monitoring system that measures the drilling mud that’s going into the well and measures what’s coming out.

It’s fairly sensitive. If oil and gas comes into the wellbore and starts to come up inside the well you see this quickly and you start to take some action to prevent it. Your first line of action is to close the BOP, the

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stack of high pressure valves essentially sitting on the sea-bed latched onto the casing pipe and you can close in the well.

Then you might try to circulate out the fluids that come in through other well designed and controlled systems choke and kill manifold. But none of that seems to have happened. Some of the pictures that we can see, taken by ROVs are that there’s still oil coming up through the pipe and there are some pictures of drill pipe, which has broken off in the water column. It’s hard to tell what height it is in the water column, but oil is seeping from the open end of the drill pipe joint, which is underwater.

Which would seem to indicate that the drill pipe was still in the BOP, oil is coming up inside of the casing because it’s coming up through the drill pipe. There’s also the drilling riser, the 21 inch diameter pipe, which connects the top of the BOP to the drilling rig through which the mud returns are circulated back up to the rig.

That broke off when the rig sank and is hanging partially bent in the water column with some cracks in it and oil is seeping out of the sides of the riser. So, what could have been the cause here?

Certainly this was a discovery, certainly they had big oil and gas in the reservoir and that came up through and from the stories I can hear told it was a surprise when it got to the surface. It wasn’t a normal drilling operation that people would have been monitoring. They had set the cement plugs in, were pulling out of the hole.

I have heard anecdotally – not from Transocean – that they had displaced the mud in the riser and the drilling mud is used to counteract the hydrostatic pressure. So you use mud and you weight it up so that the weight of the total drilling mud is approximately equal to the pressure you expect to see in the reservoir.

So the reservoir doesn’t come into the wellbore, the mud weight holds it at bay, balances it out. But when you complete the drilling operation you recover the drilling mud at the surface, you replace it with sea water in preparation for finishing the well, disconnecting the drilling riser and going home.

That’s why you set the cement plugs. That’s what I have heard the stage they were at in the well. So, it’s quite peculiar that the well should come in. Like I say, there is a lot of uncertainty surrounding it. Nobody really knows, but if the cement plugs were in place then one has to believe that the cement plugs failed. The BOP did not close, but there’s some question that the BOP, did anyone even try to close it?

On these modern BOPs and I have read in a Transocean press release that Deepwater Horizon’s BOP did have this function, some call it an auto share function, some call it a dead man’s switch, but if communication is lost with it, it has an electronic cable from the rig down at the BOP in the sea-bed, if communications is lost and hydraulic pressure being supplied from the surface is lost then the BOP should automatically close. And it didn’t do that.

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I’ve heard some speculation that the explosion destroyed the electronic control cables going down, but maybe the hydraulic pressure was still there because it usually comes down a rigid pipe strapped to the riser and so the so-called dead man switch didn’t function.

O. Slorer Well, Mike, I’m sure we’re going to have a lot of follow-up questions on this and thank you for a very good explanation of some of the things that could have gone wrong here. Jack.

J. Coleman This is Jack Coleman with Energy North America in Washington. First I want to say a few things. In my long history as a senior attorney with the Department of the Interior representing the Minerals Management Service and then as counsel on the Hill working on these issues for more than six years, leads me to conclude several things.

One, obviously, this is the worst accident in the offshore program in the U.S. waters in more than 40 years from a drilling point of view. Tremendous strides have been made in technology in that time and I believe that from a point of view of policymakers, both within the administration and within Congress, it seems to me that from what I’m seeing that while there are some calls for some immediate action, the more responsible and I think the more predominant approach will be that a calm, reasoned approach I hope will take effect and any changes which will affect the offshore program will happen after the investigation is completed and we understand what actually happened here.

One of the things I want to address pretty much upfront is that comment today by White House Senior Advisor, David Axelrod with regard to, and I’ll quote, he said, “No additional drilling has been authorized and none will be until we find out what happened.”

I think, obviously, some have misinterpreted this to mean that no more drilling will happen in the Gulf of Mexico until this investigation is completed. I don’t believe that that’s what that means. From a legal point of view, you need to take these kinds of declarations by government officials in a least restrictive and least damaging way from a legal point of view.

I have to believe that he did not mean that he’s intending to revoke permits or permissions that have been given already for existing, and I thin there are other statements by other government officials, which indicate that existing permissions will be able to move forward.

It’s one thing to go and inspect or re-inspect platforms and drilling rigs to make sure all the existing regulations are being followed. It’s another thing to start saying, or have it interpreted that you’re going to interrupt existing contractual legal rights that have been granted by the government, which include these permissions and permits to drill.

So, I don’t think that should be interpreted that way and the second thing, he mentioned that no domestic drilling in new areas is going to go forward until we have an understanding of this. I think what that probably means is the areas that President Obama announced several weeks ago, that would be potentially opened for leasing in the next five year program, those are the new areas.

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Certainly the Gulf of Mexico is not a new area for drilling in the OCS. So, that’s certainly my interpretation of his statements and I do believe it’s backed up by comments from other officials within the government. And certainly I’ve litigated many breach of contract cases on behalf of the government, including the Destin Dome case, the case offshore Southern California, the 3600 off-leases, which resulted in another case which resulted in the Supreme Court case Noble v. U.S. in 2000.

Those cases, the ruling in those cases basically would urge the administration to go very cautiously about restricting existing rights and permits. One of the things that I do think probably, almost certainly will happen, every time there is a major accident like this, whether it was with a tanker, whether it was with an exploration rig, there will be a huge review, which is already initiated of what went on and a review of the existing regulations.

Also the existing state of technology. This is a rig that was built in 2001. Obviously, things will be looked at to see what is the most modern technology that’s available today? Almost certainly there will be more inspections by MMSS personnel and Coast Guard personnel drilling and rig activities and platform activities.

That will not take place; of course, they’re going to inspect right now as Secretary Salazar has announced to make sure all the existing regs are being followed. But I would think that any significant changes to that will await to a lessons learned approach after the investigation has taken place.

O. Slorer Steve, what is your view on the situation?

S. Candito From my perspective I think the interesting thing to focus on is, of course, we see all the news reports designating BP as the responsible party and, of course, that is accurate under this Oil Pollution Act of 1990. But what’s important to understand about that is the law was set up so that someone would be designated a responsible party, to make it clear who has to take charge of the spill response, who has to get things going quickly, making sure that there’s no (inaudible) in negotiating contracts or prices for spill response.

But, in designating the operator in this case of the drilling unit as the responsible party, that is not specifically designating them as the person who ultimately bears responsibility for what happened.

And I think as Mike has already explained, that will probably be determined by whatever is in their contracts there. And I think maybe the best way to illustrate this sort of scenario is more in the tanker context.

We’ve had these examples put out is if you have an oil tanker that’s anchored and is completely innocent, isn’t doing anything, it’s just anchored there and another vessel comes along and loses its propulsion and basically crashes into that anchored tanker, even though the anchored tanker hasn’t done anything they’re still the responsible party and they’re the one that has to initially do the clean up, pay for the costs, have those contracts in place.

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So, that’s the role that BP is currently playing as the operator of this thing. Now, what’s also tied into these regulations, though, in exchange for taking on that responsibility, maybe even when you’re not ultimately at fault, let’s say, there other limits in the laws.

And, of course, this gets very complicated for offshore drilling rigs because in certain scenarios they may be considered more of a vessel. In other scenarios they could be considered more of a platform. But there are scenarios where the operator can perhaps limit its liability to something on the order of maybe $20 million and then on the other end of the spectrum it might as high as $350 million, depending on where this particular scenario fits into the various gamuts.

But even then there are ways to break those limits. Obviously, if they’re doing something in violation of the law you might not be able to limit your liability and even within those limits they are still responsible for certain removal costs and could be responsible for other damages.

Another area of damages that people aren’t focused on yet, but could become very significant are natural resource damages. Right now the damages that people are looking at are the actual clean up costs, which, of course, could get to be significant. But ultimately if you’re losing fisheries and tourists can’t go to beaches and things like that, those kinds of damages can also come into play eventually.

So, I think those are the interesting things from the legal perspective to start with.

O. Slorer Okay, Jim.

J. Lucey I’ll defer until Q&A, but I’d like to make four quick points right now. First, I don’t think that President Obama will dramatically reverse his course on offshore drilling. I think that his stance, in general, will be positively oriented even if he’s not moving on it any time soon.

I do thing that climate legislation is likely dead that may have utility implications. In fact, any energy legislation is unlikely to happen in the near future in the current Congress.

Third point, I do think that Congress will revisit offshore drilling in a very comprehensive way in the future, after the filter of considerable time, after the filter of much fact-gathering, after the filter of an election. I think that what will result will be a comprehensive overhaul of everything pertaining to the production process.

And, frankly, this may be a positive outcome. I would not fear it. I think that net-net, when all things are considered we’ll probably have a more robust, more reliable regime for offshore drilling.

The final thought I have, though, has to do with the costs, the costs of production. You are going to see royalty rates increase. You’ll see rental rates increase. You’ll see additional regulatory costs, requirements for expensive equipment; a lot of things are going to go into the cost basis now, so while I think the future legal and political regime will probably be favorable on balance, you do need to think about

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new costs that might have implications for natural gas prices, though I’ll leave that to the gas price expert, with Ole here.

O. Slorer I think we will take some questions and what should people do to ask questions? It’s star one on their phones or what is it?

Coordinator Absolutely.

O. Slorer And I will actually press star one first and ask the first question, which is this is maybe to Steven. The OPA 1990 followed the Exxon Valdez. It was a brand new tanker. It was a drunk captain, yet there was legislation that came out afterwards mandating double hulled tankers, which clearly would have done absolutely nothing to prevent the accident.

And there was no legislation against drunken captains already in place. So, what could some of the outlier effects be when we get the next whatever oil pollution act of 2011?

S. Candito Yes, good question. I mean, certainly you’re right that the law required these double hulled tankers. It created this liability regime that I just briefly explained, but yes, what could come out of this going forward? The question might actually go back to Mike a little bit more from a prevention perspective. I mean, that’s really what they were focused on and I’m not a technical expert.

But from the spill response perspective, I think all of that has actually proceeded fairly well, so part of the law required so many feet of room to be available in a certain time frame, so many skimming systems to be available in a certain time frame, so many temporary storage to be available and all of that was available according to the law so I don’t see that they would be looking to increase those capabilities, although you never know. I guess it’s a possibility.

But, yes, I think if there is going to be a focus on regulations, it’s probably something more technical just as the double hull were more technical with double blowout preventers or whatever else you can do from a technical perspective to try to stop some of these things.

O. Slorer Mike, can you explain the difference in standards in the Norway versus the Gulf of Mexico?

M. Smith Yes, in fact, I’ll make some more general comments about the background. In the drilling community, in the oil field community here BP is considered, even though they had the refinery explosion and have come under scrutiny, BP is considered to be one of the most safety conscious oil companies that work here in the Gulf of Mexico. They spend a lot of time on it.

The Deepwater Horizon was built in 2001, so-called fifth generation semi; it was really well-liked, considered to be a very well built rig, a very safe rig. It was BP’s top performing rig in the world. I had a good safety record. They drilled the deepest well they had ever drilled. It had its crew on it continuously

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since it was delivered, since 2001. You know, there was some question about the thinness, the stretching of the qualified crews on some of the new builds that are coming out now.

But the Horizon had a good, long-term crew and reports have come back from people that were onboard that the evacuation took place in a very orderly way and BP is quite complementary about the way things were handled once the explosion had occurred.

From the standpoint, even the front page of The Wall Street Journal as poked its finger into the so-called acoustic control system a couple of times here. What happens in a BOP control system is the BOP stacks and even the sea-bed is, in this case, five large rams, like big gate valves that will close off the 18¾ inch hole, which is the well at that point.

One of them is a shear ram that’s got big cutting blades on it, like a giant pair of scissors and it will cut right through pipe and seal off the well. The others are typically pipe rams, so they have rubber elements that have a semi-circle on each side and they come together and will seal around the pipe leaving the pipe in place without actually cutting everything in half.

This was a modern BOP stack. The control system is a multiplex control system. Shower water rigs that are moored typically have a hydraulic control system such that hydraulic fluid is pumped right down to the BOP from the surface and that hydraulic fluid functions the different things in the BOP stack, forces the rams to close, opens and closes valves.

When you get to deeper water, in the case of the Horizon, which was a DP rig, the response time in the hydraulics gets a little bit slow so they go to an electrical system, like a multiplex signal and there are electrical cables from the surface that rig down to the bottom.

Well, if the cables are destroyed you no longer have any signal ability to perform functions at the BOP stack. In Norway in about 1982 they required an acoustic pod. Whereas the whole BOP may have 65 functions that are necessary to actuate all the controls, the acoustic pad will have about eight. It costs about a half million dollars.

It resides on the BOP. It’s electric with batteries inside and if you totally lose control from the rig itself, from the surface you can dip a transponder over the side of the supply boat and send like a sonar signal to this acoustic pod and then you can actuate the functions, even though there’s no connectivity between the rig at the surface and the BOP stack down below.

For very many years Norway was the only country that required that and in the last five years Petrobras has adopted it on some of their deep water rigs. It’s never been required in the U.K. sector of the North Sea. It’s never been required in the United States.

Some argue that it’s unreliable and the argument has also been that there are ROV hot stabs that if you completely lose control from the surface, from the rig itself, an ROV can intervene at the BOP stack and

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effectively accomplish the same things that this acoustic pod would have accomplished with higher levels of reliability.

So, I’m sure there will be some debate that comes out in the regulatory community about should U.S. rigs have this acoustic pod and there are arguments both sides, but it’s never been adopted in the Gulf of Mexico or anyplace else except Norway and to a certain extent in very recent years in Brazil.

O. Slorer Mike, are there any ways that the BOP could have been activated, but somehow was not strong enough to share some of the pipe or cement plugs or whatever was stuck inside it?

M. Smith Well, the shear rams today on modern stacks have oversized hydraulic actuators and they can shear most any kind of drill pipe, unless sometimes you get the tool joint; the drill pipe is a five and a half inch, six and five-eights inch diameter pipe. Well, where it’s threaded together, the connection gets much thicker and much tougher to cut. It’s possible that a tool joint was right at the point that the shear ram sort of sheared. But even then most big, modern shear rams will cut that.

They’ll cut nine and five-eights casing and most of the boosted shear rams will cut 13 3/8 casing, although they may not seal after they do that. They incur some damage in the process. My understanding is that the well was in the reservoir section, targeted to go 18,000 feet. At 18,000 feet they wouldn’t have been dealing with anything like 13 3/8 casing. That’s much higher up.

They set probably a production string and what I hear, which is not to be completely relied on, was that the well was done. There was no casing being run through the BOP. They were tripping the drill pipe out. So the shear rams should have been able to cut whatever was in, passing through the BOP and it would seem that, based on some underwater photographs the Coast Guard has put up on their Website taken from ROVs that there was drill pipe still passing through the BOP because when the riser buckled and broke off, the riser was laying horizontal on the sea-bed and at one break point drill pipe is sticking out of it.

So, they hadn’t recovered all the drill pipe up at the surface yet apparently and some oil is slowly leaking out of the end of the drill pipe. Did that address the question, Ole?

O. Slorer Yes. Are there any differences between the BOP from Cameron, High Drill, and Schaeffer or are they all pretty much the same and how simple are these BOPs? Can you explain how these BOPs are tested? This is, clearly, a 10-year BOP; what’s the life cycle of a BOP?

M. Smith Most rigs built even 30 years old today, they still have the original BOP. BOP is big and heavy. The Horizon’s BOP probably weighed 300 tons. The rams, there are some differences in the design of the different manufacturers the way they go about their business, but it’s big iron brute force, two big scissors pushed on by several thousand PSI of pressure to just come together and close off the wellbore.

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You know, all the designers think their design is the best and they’re fairly proud of it, but their basic function, they’re pretty rudimentary. You put hydraulic pressure on the outside and the rams slide together and cut off what’s in the wellbore and they seal off this 18¾ inch hole.

It could have been that the; I suspect at the end of the day that the BOP stack did not close. The question will be why didn’t it close? Some speculation is that because they were tripping out of a hole, they had set cement plugs – I understand they set cement plugs, I can’t verify that that’s absolutely true – that you think the well is safe. It’s sealed in. You no longer have any communication with the reservoir.

You’re way up higher inside of strong, cemented casing pipe with cement plugs in between and you’re tripping the drill pipe out, recovering from the wellbore to put it in the derrick. So, if then gas, oil and gas was coming up the riser quickly and it wasn’t noticed – I have heard from some people – that an explosion happened very quickly, was surprising, not expected. That would have disabled the BOP controls at the surface of the rig instantly and probably the guys for any of that were killed.

So, there was not someone left there to try to actuate the BOP. There is a remote BOP control unit in the accommodation, usually in the tool pusher’s office. It’s electrically connected back to the main BOP controls and so even if you had a fire in the drill floor and cellar deck, the senior supervisor, tool pusher, assistant superintendent should be able to hit the button and try to close the shear rams.

But, if the explosion melted or disabled the electric cables that go from the rig down to the sea-bed then there’s no communication anymore.

O. Slorer So, the life cycle of a BOP, it’s a 10-year old BOP here, would it have been any different if it had been a brand new BOP and having a brand new BOP have been a difference to a 10-year old BOP? Talk a little bit about, what does a 10-year old BOP really mean? How often is it maintained, tested, who signs off?

M. Smith The BOP is really regularly maintained. You have a pressure testing system on the surface, so when you’ve drilled a well you bring it back up at the surface. You disassemble the BOP. The steel elements stay and the rubber sealing elements are regularly replaced. They have a shelf life and they’re regularly redressed.

This is a 15,000 PSI BOP and you have pressure pumping equipment on the surface and a test stump you put the BOP on, you pressure test it up to 22,500 pounds over pressure to make sure it can safely hold the 15,000 it’s designed to do.

That happens every time you have it on surface. When it’s on the sea-bed, you can put a test tool in the BOP and you can close the rams on it and you can pressure test it from both above and below in the same fashion. And regulations require, oil companies require as a matter of good practice and drilling contractors regularly test the BOP and regularly renew any worn parts in it.

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So, I would have thought that a 10-year old BOP seeing normal maintenance and service would be just fine. I wouldn’t have thought that there should have been any problem related to age or wear of the BOP.

O. Slorer Okay, thanks for that, Mike. Steve, Jack, Jim, any kind of final comments from you, after having heard this, before we open it up to general Q&A.

Okay, Operator, in that case if we have any questions, we’ll take them.

Coordinator Your first question comes from the line of Jeffrey Schwartz. Please proceed.

J. Schwartz Hello, gentlemen. I was just wondering about.

O. Slorer Jeffrey, could you please just name your affiliation.

J. Schwartz Oh, I’m sorry. Jeffrey Schwartz, Metropolitan Capital. I was wondering about the relationship between BP as the operator and the other folks who have working interests here, I guess Anadarko and Mitsui, I think, for any potential liability on clean up or other liability that arises out of this.

J. Lucey I can start on that one. When the operator files his response plan with, in this case, the minerals management service, the lead entity has to take that initial responsibility. And as we know in this case, that’s BP. They have accepted that responsibility.

So, it is BP that’s leading all of this and is going to pay for all of this initially and that’s what’s required under the OPA 90 regulations. But, as Jack mentioned earlier, with regard to the different contractual relationships between the operator, the driller and maybe the blowout preventer manufacturer, there’s a contractual relationship between BP as the lead operator and then whoever other minority holders are in there and I don’t know anything about those contractual relationships and they could be different. They’re not necessarily standard.

But, clearly, BP has the front line obligation here.

O. Slorer Okay. Next question, please.

Coordinator Your next question comes from the line of San Sibah with J.P. Morgan.

S. Sibah A question regarding the relationship of the engineers for Smith on the platform and I guess the guys who kind of give them their marching orders with respect to the mud. I understand that the two engineers, one of them, I forget his last name, but he had 20 years of experience; the other guy, I don’t know what his background is, but typically it takes a couple of years to really understand exactly what the right mix is.

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It’s not really something that you do carelessly or make errors in. But I think what the issue is if you have BP or anybody who is in a rush to try to get the rig, get the job done or whatever, pressures these guys to get the mud done quickly, you might end up with the wrong mix there with respect to the density and the viscosity of the mud.

So, if that were to happen; I’m just concerned that maybe there’s a bit of finger pointing that goes on there between the two parties. I think that the mud is monitored and tested and the data on the density and viscosity is transmitted to some location twice a day.

O. Slorer I think let’s try to handle that one, Mike. Can you repeat what you said about cycling out the mud and replacing it with sea water because the cement plugs, that failed, and appeared to have been intact at the time and how quickly does this happen. Can you just give us 20 seconds on your take on this?

M. Smith Yes, what I have heard and, of course, all of this is speculation. It’s not from Transocean or from BP, but what I have heard from people who have had some discussions in the industry is that they completed drilling the well and/or were temporarily abandoning it so they had pumped cement inside of the casing, inside of the final pipe that was successfully cemented in.

They had pumped cement plugs in that later on, when they came back to hopefully make this a commercially productive well they would drill through that cement and do a completion where they could produce the well.

So, at that point the well is considered to be safe and inert, no longer relying on hydrostatic, the weighted mud, to control wellbore pressure. Whether that turns out to be exactly accurate I’m not sure. That’s just what I’ve heard.

O. Slorer So, you don’t think that the MI drilling engineers in any form or shape should have or could have spotted the early signs in the mud coming out of the wellbore?

M. Smith No. I would think that they are way down the list of anyone that might bear any responsibility as it’s trying to be apportioned. The other thing I would say is that if this turns out that it was not true, that the wellbore was still open to the reservoir and there were some drilling operations going on, including weighted mud, the density of the mud is one of the easiest things to measure.

The mud engineers are there really there are all kinds of additives, specialty chemical additives that you can put in the mud to accomplish.

O. Slorer Mike, who do they take their marching orders from?

M. Smith Basically the oil company guys are going to determine what kind, oil company drilling engineers who design the well will determine the types of mud that they want in the wellbore to do the drilling.

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O. Slorer Okay, thank you very much. Next question.

Coordinator Your next question comes from the line of Steve Patton with Oz Capital. Please proceed.

S. Patton Quick question on the BOPs. Given the kind of 10, 14 day testing regimen of the BOPs and it sounds like Transocean is the one ultimately responsible for selecting which BOP gets used. If it turns out that Transocean hadn’t properly set up the control system or it was a failure with the control system, who ultimately bears responsibility and what is the relationship between Cameron and Transocean in determining who is at fault?

M. Smith Shall I take that, Ole?

O. Slorer Mike, I think you’re probably the best qualified, yes.

M. Smith On this rig, a nine-year old rig, Transocean made the purchasing decision probably in 1998, 1999 to buy a Cameron BOP.

O. Slorer It was a Reading & Bates rig, wasn’t it?

M. Smith Yes, it was a Reading & Bates rig at the time, before Transocean acquired Reading & Bates. So the purchasing decision would have been made. The equipment will be on a warranty. My thought is that it’s owned by Transocean, it’s maintained by Transocean, it’s part of their rig.

The only place where I would think, and I’m not a lawyer, it would look like the Cameron, if it turns out that there was a patent defect that had yet to be uncovered and now in some peculiar circumstance the BOP failed because it was just incorrectly designed and built in the first place, other wise it’s Transocean’s BOP. It’s on a warranty. It’s their responsibility to maintain it.

S. Patton And if could just ask one follow-up on that, can then the testing regimen and what you described earlier, how could there be a patent defect and even if there were, wouldn’t it be the responsibility of Transocean to identify that through the testing process?

M. Smith Again, I’m not a lawyer and that was just a sort of stretch. My own feeling is that it’s unlikely that there was anything fundamentally with the BOP. That it was a cascading set of circumstances.

O. Slorer Mike, we’re fortunate enough to have three lawyers on the call. So, anybody want to offer anything here?

J. Coleman This is Jack Coleman. I would tend to agree with what Mike just said. Unless there is shown to be some inherent defect in the BOP, at this point in time, after the warranty has expired, etc., it would seem to me that Cameron – this is just my off the cuff opinion – that Cameron would be clear on this.

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O. Slorer Yes, that’s my judgment, too. Any further questions.

Coordinator Yes, your next question comes from the line of Kahn Aran with CPP Investment. Please proceed.

K. Aran I have a question regarding, right now it seems like the most likely scenario for stemming the flow of oil from this well, and I guess this is a question for Mike, is drilling a relief well and it sounds like two relief wells will be drilled and the time horizon for that seems to be somewhere in a two to three month period.

And I’m just wondering are there any other scenarios that we should be considering, whether it be ROV or what I think is referred to as sort of an inverted funnel using more shallow regimes that might sort of surprise us in a positive way in terms of stemming the flow of oil?

M. Smith My understanding is that ROVs have been on the BOP stack and there is even a small video on the U.S. Coast Guard Website of an ROV working on the hot stack for the shear rams. You can even read the stenciling.

So, as we talked about a bit earlier there is, on the BOP, if all communication is lost with the surface, there is functionality there when ROV can go in, put a sort of stinger type thing into a hole and pump direct hydraulic pressure from a little hydraulic pump on the ROV to try to manually close the rams.

That’s been tried and it didn’t work so far. If there’s a problem with the venting maybe they’ll go back and try to open up a hole that’s blocking the ability to close the rams. There may be some more things to try there, but the first try didn’t work.

In terms of the funnel, that’s pretty novel. It takes some time to put it together. It won’t stop the flow of oil, but it will allow the flow of oil to be channeled into a separate pipe where the off-take can be controlled and put it into a tank ship of some sort. I don’t know how long it’s going to take to put that together and to deploy it.

K. Aran Thank you.

Coordinator Your next question comes from the line of Louis Sarkes with Chesapeake Partners. Please proceed.

L. Sarkes Thank you very much, very informative call. I just want to make sure that I heard what your base case is. Barring any equipment mal-design or anything, the vast majority of the liability for the cost of both pollution clean up and probably the cause of the accident will lie with the operators, is that correct?

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O. Slorer Yes, Mike, maybe you can address some new negotiate – Mike is a Senior Partner in… and the contract for the drilling rig, I suggest very much you call Mike. He knows them all. So, Mike, when you negotiate charter parties, what type of liability clauses, can you go a little more into detail here on what a drilling contract would accept and what it would absolutely not accept?

M. Smith Usually in the liabilities indemnities, the drilling company and the oil company adopt what’s called a knock for a knock approach to responsibilities. From a people point of view the drilling contractor takes responsibility for his people and the oil company takes responsibility for his. Where the drilling contractor is most sensitive is sometimes what we refer to as the Big Three: pollution from a blowout, reservoir damage – let’s say the driller was doing something wrong and damaged the reservoir – and loss of production, that you had actually a producing reservoir that had 500 million barrels of oil on it and the drilling contractor screwed up the oil company’s reservoir.

What we’re focused on here is pollution from a blowout and always in a drilling contract, one of the most sensitive things the drilling contractor does is his insists on liabilities and the oil company gives it to him that says the oil company will protect, indemnify, and defend the drilling contractor in the case of cratering, blowout or seepage of oil from sub-sea.

The drilling contractor takes responsibility for pollution which emanates from the rig. It’s sometimes said reduce to control. And Transocean is very strict about this stuff. This contract was negotiated in a relatively strong contracting period where the leverage is in the hands of the contractor rather than the oil company because there is an ebb and flow about who’s got the leverage when you sit down to negotiate the contract. Transocean had pretty good leverage at this period of time.

I would be shocked if contractually Transocean has any liability whatsoever for pollution from this blowout.

O. Slorer Thank you very much. Actually, Steven, if this rig had diesel, fuel oil, etc. in the tank and somehow this has leaked out, can you explain a little bit how you would think about that?

S. Candito Absolutely. Of course, this is in very, very deep water so recovering those kinds of oil from the rig would be difficult, but that is something that we do undertake very frequently. When I say we undertake, usually there’s a salvage organization involved, again, using ROV vehicles to pump the oil from the tanks and get it to the surface and generally an organization like ours is standing by with the spill response equipment, should anything leak while you’re trying to recover the oil from the sunken vessel or, in this case, rig.

But I’m not a salvage expert and I don’t know whether that could actually be accomplished on something this deep, but those types of things can occur.

O. Slorer Okay. Questions?

Coordinator Your next question comes from the line of Marten Mickos with Madison Square Investors. Please proceed.

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M. Mickos Steve, if I heard you correctly, you said that Transocean basically would most likely have no liability in the issue. What about Halliburton? What are your thoughts on their liability exposure?

O. Slorer Halliburton did the cementation job and it sounds as if anything failed it was the cement. So, Steve, Mike, do you have any view on what kind of contractual liabilities might be involved in the service company as opposed to the drilling contractor?

M. Smith I’ve never been involved in the contract negotiation between cementing company and the oil company, so I really don’t know.

O. Slorer Have you ever heard, ever, of a situation where the service company is held liable?

M. Smith No, I’ve never heard of one.

O. Slorer Neither have I. Steven, any views from you?

S. Candito Yes, again, I’m not an expert on that, but I’ve never heard of those situations either.

O. Slorer I categorically don’t think that any service company would ever sign a contract that would give this type of liability and that’s one of the debates about working for Pemex in the Mexican sector, which is the only place in the world where things are a little different.

M. Mickos And just a follow-up on the question, if I can? What is the ability to actually determine the cementing was an issue given the depth of the drill and the conditions of the sea-bed?

M. Smith I think it’s nearly impossible. I’m guessing here, trying to fill in blanks, but when you see the amount of oil, the size of the fire. It was being fueled by a really large amount of hydrocarbons. It wasn’t a small leak. It didn’t come up around the outside of the casing. It must have come straight up the main wellbore, which means that whatever was there if it failed was blown out, it’s scattered in pieces all over 5,000 feet of the Gulf of Mexico.

M. Mickos Thank you very much. This was very informative. Thank you for the call.

O. Slorer I think that it will be a field day by our three lawyers.

Coordinator Your next question comes from the line of John Levy, with Federated. Please proceed.

J. Levy It’s really the same question that was just asked, but to you, Ole. Is there anything we can draw from the experience in East Timor or that blowout? I don’t know whether the paper was correct this morning when

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they said that Halliburton did that cement job, but what happened there? It seemed to go away in investors minds. Any thoughts?

O. Slorer I’m not familiar with it and I’ve heard some hearsay stories about the cement and the type that was used and certain operators that would not accept this type of a cement job, but I do not want to comment on that.

Mike, you are welcome to if you’d like to.

J. Levy It looks like installers spilled anyway. Well, who knows what this is going to be, but I’m just looking on the screen here and they talk about less than 100,000 barrel spills, I mean it’s a huge spill, obviously, but maybe we’re talking about something multiples of that, who knows?

M. Smith I don’t have enough knowledge about what happened in East Timor to make an intelligent comment about that.

O. Slorer I’m sorry. We can’t really help you with that. Next question.

Coordinator Your next question comes from the line of Marcus Homer.

M. Homer Thanks for the call and thanks for taking the question. It’s two questions I have. One is very layman. How many people are working on such a platform at that point in time and I guess you said you were under the impression that drilling had stopped and they kind of moved on to closing off the well, moving on to the next stage. At that point, what were the employees still doing then?

I guess the second question is you mentioned this blowout protection mechanism and that there was some kind of dead man switch. Now, once you move to this stage where you are actually preparing the well for just getting the oil out, is it common that people override the dead man switch?

O. Slorer Mike, maybe you could start off by explaining the nature of a drilling crew, how many oil company people, what do they do, how many people from Halliburton that work on cementing, how many people from Tenares or Weatherford that were on the casing? Just give us a breakdown of how many people employed by the drilling contractor and everybody else that works on this machine.

M. Smith The Deepwater Horizon had 130 beds and it’s a combination, so that was its maximum capacity. I think I’ve read that there were 120 something people on board at the time.

The drilling crew itself, that would be something on the order of 50 or 60 guys. And then you’d have electric logging company; Schlumberger does a lot of that, it might just be a couple. A mud logging company that might have three or four people. You’ll have the ROV company, a lot of times two ROVs, a work ROV and what we call a swimming eyeball that’s really just a light observation unit.

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Directional drilling guys that are on board; the mud engineers and sometimes you just have one mud engineer. I’ve heard people say there were five Smith guys on there and that kind of confuses me.

O. Slorer Probably MI guys rather than Smith guys.

M. Smith Sorry, MI guys, yes.

M. Homer So why would these two guys still be there, so close? Why would they be in such close proximity to the explosion that they would suffer from this relative to the other people on the platform?

M. Smith Well, the platform crew, especially on a DP rig, you have electricians, mechanics and motor men and electrical supervisors and these guys are not associated with drilling; they’re associated with keeping machinery up and running and they won’t be near the drill floor.

You have the captain or master and he’s got control room operators and crane operators and roustabouts and guys that keep the rig clean and paint and take care of cargo handling. So, the lion’s share of people onboard in offshore drilling like this have nothing to do with the drilling activity actually taking place in the middle of the rig.

The drill floor crew and the mud engineers, if they’re still actively working will be near the center of the rig because the mud engineers will catch samples of the mud, which is coming back from the well to monitor it.

M. Homer When they’re beyond that stage, that’s my question because initially I believe you said that the mud was no longer in the picture because that phase had stopped. The well was completed.

O. Slorer I think they were probably circulating the mud out and replacing it with sea water and mud is a rental business, so you re-collect and clean up the mud is probably what the MI people were doing. One final question, please.

Coordinator Your final question comes from the line of John Wengraf with Courage Capital. Please proceed.

J. Wengraf This is very useful, thank you. Two questions.

O. Slorer John, I think we lost you there.

Coordinator John, if you wish to press star one again, please do so.

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O. Slorer In the meantime, let’s take one final question from somebody else.

Coordinator Oh, I’ve got him back, actually. Go ahead, John.

J. Wengraf Hello, am I there? Two quick questions. Do you have any sense of when, if ever, we will actually have a definitive answer to what went wrong? And the second question is can you paint a scenario where Transocean was at fault here? That, despite the contractual language, that there was something so severe happened that they were actually the liable party.

J. Lucey Maybe I can start on that one, the latter part of your question there. Typically in those indemnification provisions there is an exception for gross negligence or willful misconduct is usually the terminology used. So, for some reason if there is an allegation of that next level of bad acting, that might be a possibility.

Again, we don’t know or I certainly don’t know the details of that specific contract, but that would not be uncommon. And as far as the first part of the question, yes, I’m sure there will be technical analysis that will give some kind of conclusion on what they think happened, but what typically happens in any kind of litigation each side has their own technical expert that has maybe opposing views and you really don’t have an answer to that question until it’s gone through some extended litigation, which could be years off at this point.

J. Wengraf But given where you think they were in this drilling process, where they had set these plugs and so on, what at that point could the crew or the equipment have done that would have been gross negligence? I mean, is there something we can imagine that would rise to that level, given that stage of the drilling process?

J. Lucey I’ll defer to Mike on that because I’m not that familiar with the technical operation.

M. Smith Let me just say again, none of the information that I’ve related today came from Transocean or came from BP, so a lot of this is industry gossip, some indirect conversations that I’ve heard second or third hand that are reported to have come from BP.

I think that that’s where they were in the well, they had cement plugs in the well, the casing was done and they were temporarily abandoning the well. It’s highly unlikely in that case that something that rises to the level of gross negligence would be found, my opinion.

As a side comment it will be interesting that the rig is so badly burned, so badly destroyed in 5,000 feet of water. It’s unlikely to be recovered and the critical elements that were associated with control of the BOP and the drill floor are just burned up when you look at the pictures just before it sank. I mean, it was destroyed.

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The BOP stack, sitting on the sea-bed in 5,000 feet, they’ll get that back. At some point in time the BOP stack will be recovered and there will be a forensic engineering job on examining the BOP stack very closely to see what might have happened there.

J. Wengraf Do you have a sense of what the timing on that would be? I mean, is that 12 months out or is that three months out?

M. Smith They could go get it next week. It’s a matter of what priorities they put onto the problem, but BOP stacks have been dropped, have been lost, have been disconnected and recovering a BOP that’s in 5,000 feet of water is not that big a challenge.

One of the rigs that’s out there to drill a relief well could go get the BOP, but he’s unlikely to want to work right over the top of this in an oil slick. They’re probably going to try and solve that problem first before they go back to try to lift the BOP stack off the well.

The BOP stack would appear to be partially closed because the oil is not flowing out like the same level of oil that caused the fire aboard the rig. Oil is coming out, but if the BOP stack is partially closed and then you take it off, well you’ve opened the wellbore to the sea, completely opened.

So, I’m sure they will try to drill the relief well, completely secure this well so it’s safe and plugged before anyone talks about going and trying to lift the BOP stack off the oil rig.

J. Wengraf Okay, so at the very least it’s a couple of months because you’ve got to drill those relief wells and get that all squared away.

M. Smith Yes, I think so.

O. Slorer Maybe one final question to you, Steven. There’s going to be an enormous cost associated with this. There’s going to be damage along the coastline potentially. There’s going to be the marshes, there’s going to be the shrimp farmers. We’re already hearing people talking about class action law suits. Any way that anything outside OPA 90 could open up exposure, legal exposure, to either Transocean, Cameron, Halliburton or BP?

S. Candito Well, yes, I think so. When you have anything of this magnitude, as we all well know in business, plaintiff’s lawyers get very creative in what kinds of actions they’re going to bring and although the OPA 90 regulation is there to try to control some of that and try to apportion some of the risks and liabilities, there are some elements of the law that leave open for state regulation and state actions, so I think we will see those kinds of things out of it, even though there was some attempt to focus or consolidate these things under one federal regime, there will clearly be other types of actions coming out of this event.

J. Coleman And let me add, this is Jack Coleman, one of the things that hasn’t been mentioned here, everyone has talked about BP being the responsible party, that’s because they’re the operator. They’re not the 100%

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interest owner. And so, unless and, obviously, I haven’t seen the contracts and the agreements between them and the other interest owners, but BP has to respond on the OPA 90 and other statutes under the Outer Continent Shelf Lands Act.

But they’re not going to be left holding the whole bag there. The other interest holders, I would expect, are going to have to carry their proportional share of the total cost, unless there is some showing that there was gross negligence on the part of BP, which would alleviate any share responsibility. That would be what my expectation would be.

O. Slorer This is going to be messy, but I think to conclude I believe that it’s very difficult to pin anything at all on Cameron. I just can’t see how that’s going to happen. I might be wrong, but I can’t see it at this point. I certainly can’t see how it could depend on MI Schlumberger.

Then, if there is a failure of the BOP it sounds like it rests with Transocean rather than Cameron, the next in line, but, again, it doesn’t sound like this is anything that was wrong or willful misconduct or anything but just a very, very brutal explosion that might have shared some of the control systems to the BOP and no suggestion at all that Transocean was doing anything illegal or not in with regulations. Then it is considered the cement job scattered all over the Gulf of Mexico.

This plug is going to be incredibly difficult to prove so I don’t think anything can be had there. So, we also heard I think that Jim Harris suggested that we would not derail any of the current plans on offshore drilling. We had Jack suggest that the rumors of stopping drilling in the Gulf of Mexico are very unlikely.

A lesson for OPA 90 maybe suggests that maybe we’re going to see much stricter regulatory environment of the age of equipment, drilling rigs used in the Gulf of Mexico, much like remember the tanker that spilt was brand new, yet there was a very rigid set of regulations coming in forcing new tankers to be used. So, all of that was not entirely logical. It happened.

Maybe we’re going to see a scenario where only new rigs will be allowed to be used, kind of a benefit something like a C drill, let’s say, with brand new rigs and penalize somebody like a Diamond with very old rigs, if that indeed was to be the case.

But on balance I think there’s a lot to think about here, too early to draw any conclusions. I thank you all for listening in. This is II season, I’ve got… in the room here. We have Steven Maresca; we have Steven Richardson for E&P. We have Paolo Loureiro here. If you appreciate this please fill in your II ballots. And if you want to talk to any of the guys, then… Lehman GLG Group is the place to contact them.

Thank you very much for listening in on the call.

Coordinator Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect.

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Industry Coverage:Oil Services, Drilling & Equipment

Company (Ticker) Rating (as of)Price* (04/30/2010)

Ole Slorer Atwood Oceanics Inc (ATW.N) U (02/19/2010) $36.41BJ Services (BJS.N) E (09/03/2009) $23.18Baker Hughes (BHI.N) O (09/17/2009) $49.76Calfrac Well Services (CFW.TO) U (02/17/2010) C$21.61Cameron International (CAM.N) O (05/08/2009) $39.46Carbo Ceramics (CRR.N) U (09/14/2009) $73.25Chart Industries (GTLS.O) E (05/01/2009) $22.99Diamond Offshore (DO.N) U (03/20/2009) $79.1Dresser-Rand (DRC.N) E (09/25/2008) $35.28Dril Quip Inc. (DRQ.N) E (05/11/2009) $57.93ENSCO (ESV.N) O (02/19/2010) $47.18FMC Technologies (FTI.N) E (02/09/2009) $67.69Halliburton Co. (HAL.N) O (01/25/2008) $30.65Helix Energy Solutions (HLX.N) E (04/16/2009) $14.58Helmerich & Payne Inc (HP.N) U (10/14/2009) $40.62Hercules Offshore (HERO.O) NR (02/19/2010) $3.95ION Geophysical (IO.N) O (04/16/2010) $6.01Nabors Industries Inc. (NBR.N) O (09/25/2008) $21.57National Oilwell Varco (NOV.N) O (09/25/2008) $44.03Noble Corporation (NE.N) O (07/29/2009) $39.49Oceaneering International Inc (OII.N)

E (02/09/2009) $65.5

Patterson-UTI Energy (PTEN.O) E (03/15/2010) $15.31Pride International Inc. (PDE.N) E (04/14/2010) $30.33RPC (RES.N) O (04/16/2009) $13.65Rowan Companies (RDC.N) E (01/19/2006) $29.8Schlumberger (SLB.N) O (04/21/2008) $71.42Seadrill (SDRL.N) O (04/14/2010) $25.26Smith International Inc. (SII.N) NR (02/25/2010) $47.76Superior Well Services (SWSI.O) O (04/16/2009) $14.5Tenaris S.A (TS.N) O (11/03/2009) $40.61Transocean (RIG.N) O (02/19/2010) $72.45Trican Well Service (TCW.TO) U (02/17/2010) C$12.9Weatherford International (WFT.N) O (09/22/2003) $18.11

Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted.

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Documents

Ole Slorer Paulo Loureiro Igor Levi Oil Services, Drilling