Oil company safety records: a black hole

(Fortune) -- Before you buy an oil stock, you can look at how it stacks up against its peers by pulling up the different companies' earnings growth estimates. You can compare their debt loads, production rates, and dozens of arcane measures of performance. But there's one crucial metric that you'll be hard pressed to find: safety records.

"There are standards, but no way of knowing who is beating them or missing them," said Deutsche Bank analyst Paul Sankey. "It's not clear to me that there's any way of working out who the safest companies in the U.S. are."

When valuing stocks, analysts strive to quantify risk, or the likelihood that events that will adversely affect a company's performance will occur (and the impact it will have on shares). For the oil industry, that includes swings in commodity prices, political coups in third world countries, and accidents such as spills or explosions.

When are oil companies trading safety for profits? Unknown.

It's that last risk, says Sankey, that poses the biggest threat to shareholders. BP (BP) investors have learned that lesson the hard way. The company announced on April 21 that the Deepwater Horizon, an offshore rig it was operating in the Gulf of Mexico, had exploded, producing a massive oil spill. Since then, its stock has sunk 15%, erasing more than $30 billion worth of market capitalization.

"We can call for higher returns, greater profits, more free cash flow, but we have to know at what point companies are sacrificing safety performance to increase profits --the single most risky and potentially value-destructive strategy possible," Sankey wrote in a recent note to investors.

Such information, he added, is paramount yet unavailable. "At this time, it is not possible to state with certainty, based on comparable data, who has combined best profitability with best safety," he wrote. "That is an enormous hole in our ability to analyze and recommend stocks."

Big oil producers like BP, Chevron (CVX, Fortune 500), and Exxon Mobil (XOM, Fortune 500) publish annual corporate responsibility reports, which delve into non-financial issues like diversity, sustainability, and safety. They typically show low injury and fatality rates among employees and contractors (all three touted injury rates lower than the industry benchmark, which is set by the American Petroleum Institute). The Bureau of Labor Statistics also tracks injuries in the oil and gas industry, but doesn't include the names of companies.

Some say injury rates are insufficient barometers of a company's safety practices. "It's not the slips and falls that are blowing facilities up; it's maintenance problems," says Kim Nibarger, a health and safety specialist at the United Steelworkers, a union that includes refinery workers.

Patchwork regulation means patchwork record keeping.

Maintenance information, however, isn't easy to pin down. There are 146 working refineries in the U.S., according to the Energy Information Administration. The federal Occupational Safety and Health Administration has direct oversight over 91 refineries, and 55 fall under the jurisdiction of state agencies. Some refineries are enlisted in a voluntary program with more stringent standards.

Pipelines, meanwhile, are overseen by the Office of Pipeline Safety, a division of the federal Department of Transportation. Offshore rigs like BP's Deepwater Horizon are regulated by the Minerals Management Service, a federal agency.

"The mosaic pattern of jurisdiction impacts our ability to strongly enforce regulations," says OSHA chief Dr. David Michaels. "There is a patchwork of agency jurisdictions that leads to inconsistent safety and health coverage."

The rate of accidents, says Michaels, has risen in recent months, heightening the need for a unified regulatory system. "We're seeing a significant event at oil refineries at a rate of once a week, more or less," he says.

OSHA posts its inspection records online, and it's possible to search through them by business name. The Office of Pipeline Safety and the Minerals Management Service also post accident data online, but neither organizes the information by company. One could attempt to cobble together a holistic safety record by poring through all of the disparate agencies' inspections records, but that would still leave out global operations. Most big oil companies have production outfits all over the world.

Nibarger says the American Petroleum Institute tracks incidents across different categories but that the information isn't public. API spokesman Bill Bush says the trade group only follows and publishes injury data.

"All of the government agencies focus on their piece of the pie, and no one is likely to have the big picture," he says. "It would be nice if they did, but they don't."

With such scattershot information, what can oil investors do to evaluate a company's safety performance? Not much, says Deutsche Bank's Sankey, who thinks the federal government should aggregate the data so there's an industry benchmark. Without such information, he says, there's no way of accounting for risk until it's already too late.