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Transocean Ltd. Announces Release of Internal Investigation Report on\r Causes of Macondo Well Incident

June 22, 2011


Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today announced the releaseof an internal investigation report on the causes of the April 20,2010, Macondo well incident in the Gulf of Mexico.

Following the incident, Transocean commissioned an internalinvestigation team comprised of experts from relevant technicalfields and specialists in accident investigation to gather, review,and analyze the facts and information surrounding the incident todetermine its causes.

The report concludes that the Macondo incident was the result of asuccession of interrelated well design, construction, and temporaryabandonment decisions that compromised the integrity of the well andcompounded the likelihood of its failure. The decisions, many made bythe operator, BP, in the two weeks leading up to the incident, weredriven by BP's knowledge that the geological window for safe drillingwas becoming increasingly narrow. Specifically, BP was concerned thatdownhole pressure -- whether exerted by heavy drilling mud used tomaintain well control or by pumping cement to seal the well -- wouldexceed the fracture gradient and result in fluid losses to theformation, thus costing money and jeopardizing future production ofoil.

The Transocean investigation team traced the causes of the Macondoincident to four overarching issues:

--  Risk Management and Communication: Evidence indicates that BP failed    to properly assess, manage and communicate risk to its contractors.    For example, it did not properly communicate to the drill crew the    absence of adequate testing on the cement or the uncertainty    surrounding critical tests and procedures used to confirm the    integrity of the barriers intended to inhibit the flow of hydrocarbons    into the well. It is the view of the investigation team that the    actions of the drill crew on April 20, 2010, reflected the crew's    understanding that the well had been properly cemented and    successfully tested.--  Well Design and Construction: The precipitating cause of the Macondo    incident was the failure of the downhole cement to isolate the    reservoir, which allowed hydrocarbons to enter the wellbore. Without    the failure of the cement barrier, hydrocarbons would not have entered    the well or reached the rig. While drilling the Macondo well, BP    experienced both lost circulation events and kicks and stopped short    of the well's planned total depth because of an increasingly narrow    window for safe drilling, specifically a limited margin between the    pore pressure and fracture gradients. In the context of these delicate    conditions, cementing a long-string casing would increase the risk of    exceeding the margin for safe drilling. But rather than adjusting the    production casing design to avoid this risk, BP adopted a technically    complex nitrogen foam cement program that allowed it to retain its    original casing design. The resulting cement program was of minimal    quantity, left little margin for error, and was not tested adequately    before or after the cementing operation. Further, the integrity of the    cement may have been compromised by contamination, instability and an    inadequate number of devices used to center the casing in the    wellbore.--  Risk Assessment and Process Safety: Based on the evidence, the    investigation team determined that BP failed to properly require or    confirm critical cement tests or conduct adequate risk assessments    during various operations at Macondo. Halliburton and BP did not    adequately test the cement slurry program, despite the inherent    complexity, difficulties and risks associated with the design and    implementation of the program and some test data showing that the    cement would not be stable. BP also failed to assess the risk of the    temporary abandonment procedure used at Macondo, generating at least    five different temporary abandonment plans for the Macondo well    between April 12, 2010 and April 20, 2010. After this series of    last-minute alterations, BP proceeded with a temporary abandonment    plan that created unnecessary risk and did not have the required    approval by the MMS. Most significantly, the final plan called for    underbalancing the well before conducting a negative pressure test to    verify the integrity of the downhole cement or setting a cement plug    to act as an additional barrier to flow. It does not appear that BP    used risk assessment procedures or prepared Management of Change    documents for these decisions or otherwise addressed these risks and    the potential adverse effects on personnel and process safety.--  Operations:    --  Negative Pressure Test: The results of the critical negative        pressure test were misinterpreted. Post-incident investigation        determined that the negative test was inadequately set up because        of displacement calculation errors, a lack of adequate fluid        volume monitoring, and a lack of management of change discipline        when the well monitoring arrangements were switched during the        test. It is now apparent that the negative pressure test results        should not have been approved, but no one involved in the negative        pressure test recognized the errors. BP approved the negative        pressure test results and decided to move forward with temporary        abandonment. The well became underbalanced during the final        displacement, and hydrocarbons began entering the wellbore through        the faulty cement barrier and a float collar that likely failed to        convert. None of the individuals monitoring the well, including        the Transocean drill crew, initially detected the influx.    --  Well Control: With the benefit of hindsight and a thorough        analysis of the data available to the investigation team, several        indications of an influx during final displacement operations can        be identified. Given the death of the members of the drill crew        and the loss of the rig and its monitoring systems, it is not        known which information the drill crew was monitoring or why the        drill crew did not detect a pressure anomaly until approximately        9:30 p.m. on April 20, 2010. At 9:30 p.m., the drill crew acted to        evaluate an anomaly. Upon detecting an influx of hydrocarbon by        use of the trip tank, the drill crew undertook well-control        activities that were consistent with their training including the        activation of various components of the BOP. By the time actions        were taken, hydrocarbons had risen above the blowout preventer and        into the riser, resulting in a massive release of gas and other        fluids that overwhelmed the mud gas separator system and released        high volumes of gas onto the aft deck of the rig. The resulting        ignition of this gas cloud was inevitable.    --  Blowout Preventer (BOP): Forensic evidence from independent        post-incident testing by Det Norske Veritas (DNV) and evaluation        by the Transocean investigation team confirm that the Deepwater        Horizon BOP was properly maintained and operated. However, it was        overcome by the extreme dynamic flow, the force of which pushed        the drill pipe upward, washed or eroded the drill pipe and other        rubber and metal elements, and forced the drill pipe to bow within        the BOP. This prevented the BOP from completely shearing the drill        pipe and sealing the well.    --  Alarms, Muster, and Evacuation: In the explosions and fire, the        general alarm was activated, and appropriate emergency actions        were taken by the Deepwater Horizon marine crew. The 115 personnel        who survived the initial blast mustered and evacuated the rig to        the offshore supply vessel Damon B. Bankston.

The Transocean internal investigation team began its work in the daysimmediately following the incident. Through an extensiveinvestigation, the team interviewed witnesses, reviewed availableinformation regarding well design and execution, examined wellmonitoring data that had been transmitted real-time from the rig toBP, consulted industry and technical experts, and evaluated availablephysical evidence and third-party testing reports.

The loss of evidence with the rig and the unavailability of certainwitnesses limited the investigation and analysis in some areas. Theteam used its cumulative years of experience but did not speculate inthe absence of evidence. The report of the team does not representthe legal position of Transocean, nor does it attempt to assign legalresponsibility or fault.

The investigation report and supporting documents are available onthe homepage of the Company's website at www.deepwater.com.

About Transocean

Transocean is the world's largest offshore drilling contractor andthe leading provider of drilling management services worldwide. Witha fleet of 138 mobile offshore drilling units as well as threehigh-specification jackups under construction, Transocean's fleet isconsidered one of the most modern and versatile in the world due toits emphasis on technically demanding segments of the offshoredrilling business. Transocean owns or operates a contract drillingfleet of 47 High-Specification Floaters (Ultra-Deepwater, Deepwaterand Harsh-Environment semisubmersibles and drillships), 25 MidwaterFloaters, nine High-Specification Jackups, 53 Standard Jackups andother assets utilized in the support of offshore drilling activitiesworldwide.

For more information about Transocean, please visit our website atwww.deepwater.com.

SOURCE: Transocean Ltd.