Black Elk turns over safety audit plan to regulators

A Louisiana-based oilfield service firm is rebuffing federal and congressional investigators’ requests for information about last month’s fatal fire at a Gulf of Mexico production platform.

The company, Grand Isle Shipyard, has not responded to a request from five lawmakers for a briefing on the Nov. 16 explosion that killed three workers and injured others. It also has rebuffed the Chemical Safety Board’s subpoenas for permits, testing results, safety assessments and other documents, investigators said.

Lawmakers, including Democratic Reps. Ed Markey of Massachusetts and Henry Waxman of California, said they wanted the briefing “in order to better understand (the) company’s role in the recent Black Elk rig explosion . . . and the extent to which (it) may involve work done by Grand Isle Shipyard workers.”

The Galliano, La. company did not respond to requests for comment.

An array of investigators are still trying to determine what caused a fire to ignite on the platform 18 miles from the Louisiana coast. Although the production facility is owned and operated by Houston-based Black Elk Energy, none of that firm’s employees were on the site when the fire erupted.

Black Elk CEO John Hoffman has said Grand Isle Shipyard workers were performing construction work at the platform at the time of the blaze.

A Black Elk executive briefed congressional staff on the incident last week. Separately, the company has submitted records to the Chemical Safety Board and has volunteered to brief investigators on safety improvements.

Black Elk also gave federal regulators its plan for launching an outside audit of the company’s government-mandated safety and environmental system, two days before a Dec. 15 deadline imposed by the Bureau of Safety and Environmental Enforcement that regulates offshore energy development.

Agency officials confirmed Black Elk submitted its audit plan on Dec. 13. A separate improvement plan is due later.

Last month, the bureau warned Black Elk that without safety improvements it could be barred from working offshore, following the Nov. 16 fire and more than 300 documented regulatory violations over the past two years.

The bureau ordered the company not to launch operations at a handful of facilities where work had been halted because of safety violations until the agency approves of Black Elk’s repairs. The bureau also demanded that Black Elk develop a “performance improvement plan” and, by Dec. 21, give the agency a detailed analysis of its violation history that identifies ways the company has changed procedures to prevent repeat problems.

The company has not been barred from continuing most ongoing work; as recently as Monday, the safety bureau approved a minor change to a permit allowing the company to continue drilling a sidetrack detouring around the original hole at one of its Gulf wells.

Black Elk did not respond to requests for comment.

Founded in 2007 by Hoffman, a former BP and Amoco executive, Black Elk holds interests in 854 wells connected to 155 platforms spanning the Gulf of Mexico. It is the main operator on 98 platforms, according to federal records.

In the wake of last months’ accident, scrutiny has focused on the company’s financial health and its aggressive acquisition strategy, which is focused on buying old facilities and reworking the offshore wells to eke more hydrocarbons from the ground.

Standard & Poor’s reaffirmed its B- rating of Black Elk’s debt in September, citing concerns about liquidity amid the company’s $192 million in funded debt and its vulnerability from a “small reserve and production base” combined with an “acquisitive growth strategy.”

Several executives have left the company, including chief well officer Carl Hammond, according to a Sept. 25 filing with the Securities and Exchange Commission. In November, before the platform fire, the company’s chief financial officer, James Hagemeier, was terminated, according to a separate SEC filing.

At the same time, regulatory filings show the company was struggling to repay debt and trim operating expenses.

The company also had been seeking new investors.

Much of Black Elk’s funding comes from a New York-based hedge fund, Platinum Partners, which earlier this year reached a settlement to recover $32 million after it claimed it was bilked by a Ponzi scheme. According to a November 2011 presentation to potential investors, Platinum Partner Value Arbitrage Fund was Black Elk’s biggest shareholder, owning 71 percent.

In November, five days after the accident, Standard & Poor’s warned investors about Black Elk’s credit risk, saying it was “highly leveraged” and had “very limited liquidity and . . . little capacity to absorb unexpected expenses or incurred liabilities.”