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RepRisk Oil Industy Special Report June 10

RepRisk Oil Industy Special Report June 10

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Page 1 of 8 RepRisk® is a registered trademark RepRisk, June 11, 2010
 
RepRiskStampfenbachstrasse 428006 Zurich / Switzerlandwww.RepRisk.comcontact@reprisk.comTel +41 44 350 6060
Following the highly publicized and ongoing environmental catastrophe occurring in the Gulf of Mexico, whichhas led to public outcry and the threat of 
shareholder litigation, the latest RepRisk ‘Most ControversialCompanies’ report looks at the oil i
ndustry. Ramifications of the oil spill are already emerging, and not only inthe US. These extend beyond the environmental damage to an address of the risks of underwater drilling, andthe possibility of a drastic change to regulation and transparency within the industry.This report has been compiled using company-related news and data from the RepRisk® tool, which capturedindependent third-party criticism on multinational oil firms, including those involved, both before and after therecent oil spill. BP consistently ranked among the most environmentally and socially controversial firmsaccording to the RepRisk Index, suggesting that its true risk exposure was always very high, a fact that was notoften taken into account by other types of analysis.Th
e question that can be asked when considering RepRisk’s data
is why it took a disaster on this scale in adeveloped country to create such a scandal and alert companies, investors and governments to the importanceof addressing social, environmental and re
lated reputational risks in what has been described as a ‘dramatic
wake-
up call’.
The current furor surrounding this event, the drop in share prices, and recent announcementsregarding possible dividend cuts by BP, have highlighted for investors a disparity between theory and practicein the claims by large asset managers that they recognize the financial risks of non-financial issues in theirinvestment decisions.According to the reputational risk radar RepRisk, the five currently most controversial oil firms are (CurrentRepRisk Index): Transocean, BP, ExxonMobil, Shell, and Chevron. However, this report considers the trackrecord of firms in the oil industry over the past two years and the top five list is therefore based on the PeakRepRisk Index, which offers a slight variation:
Transocean, Chevron, Total, ExxonMobil, and BP
This indicates that companies such as Chevron, Total, and Exxon have experienced even higher risk exposurethan BP despite its present woes.
Most Environmentally and Socially ControversialCompanies
 –
Oil Industry Special Report
Zurich, June 11, 2010 / Karen Reiner
 
 
Page 2 of 8 RepRisk® is a registered trademark RepRisk, June 11, 2010
 
RepRiskStampfenbachstrasse 428006 Zurich / Switzerlandwww.RepRisk.comcontact@reprisk.comTel +41 44 350 6060
Watchlist showing current mostcontroversial oil companies
 
*Values shown indicate current RRI and change to RRI
 
Watchlist showing RRI trendover the past 24 months
 
*Values shown indicate current RRI and Peak RRI
 
These five companies have been harshly criticized by the world’s media, governmental organizatio
ns and NGOsfor issues including severe environmental violations, human rights abuses, impact on local communities,corruption and bribery, as well as breaches of labor, and health and safety standards. Rankings are based onthe Reputational Risk Index (RRI), as measured by RepRisk.The RRI
is a quantitative risk measure that captures criticism and quantifies a company’s or project’s exposure
to controversial environmental and social issues. It does not measure overall reputation, but rather is anindicato
r of a company’s or project’s reputational risk.
 It is calibrated as follows:
 –
0-25 indicates low risk exposure; 25-50 indicates medium risk exposure; 50-75 denotes high risk exposure;75-100 signifies very high risk exposure.
 –
The Current RRI is the current level of criticism about a company (covering a two-month period).
 –
The Peak RRI is the highest level of criticism in the past two years and is an indicator of the environmental,social, reputational, and investment risk.
 –
The RRI Change is the increase or decrease of the RRI within the past 30 days.This allows an initial assessment of risks that are attached to investments and business relationships. It alsoallows the exposure of an entity to be compared with that of its peers, and permits risk trends to be trackedover time. RepRisk is used by asset owners and asset managers, commercial and investment bankers, supplychain managers, and corporate responsibility experts.Please refer to page 8 for more details on methodology.
 
 
Page 3 of 8 RepRisk® is a registered trademark RepRisk, June 11, 2010
 
RepRiskStampfenbachstrasse 428006 Zurich / Switzerlandwww.RepRisk.comcontact@reprisk.comTel +41 44 350 6060
Rank 1: Transocean Ltd
[Switzerland]
 
RepRisk detected criticism of Transocean related to worker fatalities, questionable safety standards, andbribery allegations dating back to 2007. The company came under further scrutiny in 2008 for controversiallyproviding drilling and exploratory services in Myanmar and conducting business with firms associated with the
country’s regime. In some cases, such dealings were reportedly in violation of US sanctions, allegations that
continue till today. Transocean infamously became a household name in April of this year as the owner of theDeepwater Horizon oil rig off the Louisiana coast in the Gulf of Mexico, operated by BP, which exploded killing11 workers and starting an ongoing oil spill that has already reached catastrophic proportions. The companyhas been criticized for failing to meet its safety standard targets, and is now said to be undergoing both civiland criminal investigations by US authorities in relation to the massive oil spill. Together with BP, Transoceanapparently faces at least 130 lawsuits filed by affected fishermen, property owners, and tourism operators.Meanwhile, one of its subsidiaries has been fined USD 2 million in a US court for allegedly using controversialtactics in fighting liability from a decades-old oil well spill, also in Louisiana.

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