Low oil prices slam Transocean

AP News
|
Posted: Nov 07, 2014 11:27 AM

In a sign lower oil prices are starting to take their toll on the industry, offshore rig owner Transocean announced it would take charges totaling more than $2.7 billion because demand for its rigs is falling.

Transocean said the charges forced it to delay its third-quarter earnings report scheduled for Friday.

Companies that explore for and produce oil are dialing back investment because of sharp declines in the price of oil, which is reducing rig demand and lowering rates for Transocean's rigs.

Brent crude, the most common benchmark for global oil, has fallen 28 percent since late June. Friday it traded near $84 a barrel, not far from its lowest level in four years.

Judson Bailey, an analyst at Wells Fargo Securities, wrote in a report that Transocean's charges should serve to alert investors to the deteriorating market for oil rigs, which "will only be made worse if Brent prices remain in the low-$80s."

Transocean said Friday that it expects results from the quarter to include a non-cash charge of nearly $2 billion tied to the decline in the market valuation of its contract drilling business. It also anticipates a $788 million impairment of its Deepwater Rig asset group. The company said it was delaying its earnings report due to the "complexities involved in determining these impairments."

Transocean Ltd. provides offshore contract drilling for oil and gas wells. BP leased from Transocean the Deepwater Horizon drilling rig that exploded and sank in the Gulf of Mexico in 2010, an accident that killed 11 workers and spawned the nation's worst offshore oil spill.

U.S.-traded shares of the Swiss company fell 43 cents, or 1.4 percent, to $29.49 in late morning trading, while broader indexes were flat. The company's shares have fallen 36 percent since late June.