RIG: FBR Cuts to Hold on Gulf Spill Risk

Shares of Transocean (RIG) are down another $4.71, or 6%, at $73.69 this morning after FBR Capital analyst Robert McKenzie cut his rating on the stock to “Market Perform” from “Outperform,” writing that the investigation into the explosion of the Deepwater Horizon oil rig owned by Transocean will hang over the stock until some clarity emerges. Fundamentally, he still likes the business.

McKenzie provides some thoughts on what may have happened based on his initial sleuthing:

Based on the pieces of this puzzle we have been able to assemble so far, it appears to us as if the primary responsibility for the accident may not lie with any or all of the service companies mentioned in this report. We believe that it is clearly possible that the Cameron International (CAM) blowout preventers (BOPs) were in good working order, but may have possibly been hindered by a certain wellbore procedure, which we believe would typically be determined by the operator. We also believe that the initial cause of the blowout may not have been primarily related to cementing, but may have been due to casing collapse during a negative pressure test.

McKenzie also downgraded Halliburton (HAL), the service company that put in place the set-up of the rig. He notes the choice of “foamed cement” to secure in place the “casing string” on the blow-out preventer was likely not made by Halliburton, however, but perhaps by Transocean itelf, and that it’s not really clear if said cement was in fact a problem. So Halliburton’s liability is not established.

As for Cameron, “The only scenario where we could invision any potential liability for Cameron, years after selling this blowout preventer to Transocean, would be if the design was flawed and would not perform up to specifications,” which would not be the case if the “shear rams” were obstructed by drill collars.

Got that?

Cameron today is down $1.73, or 4.4%, at $36.93. Shares of BP (BP), the owner of the Gulf project, and the firm primarily responsible for the clean-up cost, are down 64 cents, or 1.2%, at $51.92.

Reuters this morning reports BP has said it will pick up the tab for “all legitimate claims” of harm from the spill brought by any parties.

Previously: Transocean: Gulf Spill Factoring $4B in Damages? April 29, 2010