Fuel Fix: Black Elk Energy: Fatal fire hit finances, production


Posted on August 16, 2013 at 7:30 am by Jennifer A. Dlouhy in Gulf of Mexico, Offshore

Houston-based Black Elk Energy says it is still dealing with financial fallout from last year’s fatal explosion at one of its Gulf of Mexico production platforms, even as federal investigators continue to probe the company’s overall safety.

The company said the accident hurt its financial results, that oil production slowed when the accident led to delays in obtaining permits for ordinary maintenance work and that it spent more than expected for “non-recurring regulatory, legal and platform restoration costs” tied to the incident. Black Elk provided the updates in investor guidance for the second half of 2013.

The company forecast that for July through December of this year, its daily production will average 13,500 to 14,500 barrels of oil equivalent, capital expenditures will be $45 million to $55 million and earnings before interest, taxes, depreciation and amortization will be $75 million to $85 million.

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Three people died and several others were injured in the explosion and fire last Nov. 16 at Black Elk’s West Delta 32 production platform 18 miles off the Louisiana coast. The federal Bureau of Safety and Environmental Enforcement still is probing the incident, but the company has said a cutting torch may have ignited flammable vapors on the platform standing in 56 feet of water. Black Elk Energy has promised to release the report from a third-party investigation the company commissioned.

At the safety bureau’s request, Black Elk Energy gave the federal regulators a “performance improvement plan” last December and submitted an analysis of its previous violations in January. Facilities that were not producing at the time of the explosion were forced to stay offline temporarily .

The firm had racked up more than 300 documented mistakes and violations offshore before the fatal fire, and a safety bureau official said Thursday that the rates of those incidents – called incidents of non-compliance – have not declined since.

“We still have a lot of concerns,” the official said, who spoke on condition of anonymity because the investigation is ongoing.

“Black Elk has met most of the requirements that were stipulated,” the official said, but the company “has not done enough to demonstrate to us that their overall performance is improving to the point we think it should be.”

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Regulators have not given Black Elk Energy approval to resume production at its damaged platform, but they allowed repairs to begin in May. Those repairs are complete, the company said in a statement, adding:
“Over the past eight months, Black Elk officials, staff and advisers have worked cooperatively with government officials at the local, state and federal level to provide support for the victims and their families, analyze the underlying causes of the incident and implement policy and procedural improvements to minimize the risk of similar incidents in the future.”

The company otherwise had no response to the comments from the regulatory official.
The Black Elk explosion was the first in a recent spate of accidents in shallow Gulf of Mexico waters that have revived concerns about the risks of oil and gas production close to shore.

Last month, a gas well in the Gulf of Mexico blew out, forcing the evacuation of 44 workers and igniting a fire that raged for nearly two days.

Just weeks before, a briny mix of gas, light condensate and salt water began leaking out of a 40-year-old Energy Resource Technology well while workers were trying to permanently plug it.

Founded in 2007 by a former BP and Amoco executive, Black Elk now holds interests in more than 1,000 wells connected to 176 platforms in the Gulf of Mexico. It has been operating facilities in the Gulf of Mexico since 2010.

Its aggressive acquisition strategy has focused on buying old facilities and reworking offshore wells to eke out more hydrocarbons.

Special thanks to Richard Charter

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