* Transocean has 10 rigs contracted for Brazil
* Expects zero revenue in country while injunction stands
* Says this week's rig sell-off dilutive to 2013 earnings
* Shares give up early gain, end day down 0.9 pct
By Braden Reddall
Sept 12 Transocean Ltd said on
Wednesday a Brazilian court upheld a ruling that would prevent
the world's largest offshore rig contractor from operating in
the country because of an oil spill last November.
Prosecutors seeking about $20 billion in damages from well
operator Chevron Corp and rig owner Transocean over the
3,600-barrel spill sought the ban to ensure payment.
Brazilian industry regulator ANP tried to prevent the ban on
Transocean and Chevron from taking effect, but Transocean Chief
Executive Steven Newman said Brazil's Superior Court of Justice
denied the attempt.
"This is very disappointing as we believe the injunction
order is unwarranted and is flawed legally and procedurally,"
Newman said on a conference call. "The technical merits of our
case are strong and we are pursuing the many avenues available
to us to appeal the preliminary injunction and have it
Shares of Transocean gave up early gains on Wednesday, and
closed 0.9 percent lower at $46.19 on the New York Stock
Of Transocean's 10 Brazilian rigs, seven are contracted to
state-run oil company Petrobras. The others are the
rig that drilled the well for Chevron, one contracted to BP Plc
but working for Petrobras, and one hired by Vanco, part
of privately held Houston-based firm PanAtlantic Energy Group.
Many of those work at the center of a Brazilian oil frontier
that has been responsible for about a third of the new oil found
in the last five years.
A Transocean shutdown would be just the latest setback for
Petrobras. Despite a $237 billion five-year investment plan, oil
output fell in the last year. Chief Executive Maria das Gracas
Foster has cited a lack of rigs as a key factor in the company's
inability to meet targets over the last decade.
Chevron also said it was disappointed with the court's
decision and would seek all legal means to overturn the
Transocean, which generates 11 percent of its revenue in
Brazil, has not yet been served with the injunction, which goes
into effect 30 days after it is served with legal papers, Newman
The CEO said he did not assume Transocean could declare
force majeure on the contracts as a result of the injunction,
and its rigs would likely stop generating revenue while the
company fought the court decision.
"So there is a kind of a worst-case scenario that doesn't
look very pretty," Newman said on the call with analysts. "But
as I said, we believe strongly in the merits of our case, and
I'm confident that we will ultimately prevail."
UBS analyst Angie Sedita saw a "real risk of downtime" for
Transocean in Brazil until the company could overturn the
injunction, but noted its confidence in ultimately doing so.
Earlier, the company had detailed how this week's $1.05
billion sale of 38 rigs would be modestly dilutive to 2013
The company said 2013 revenue would decline by between $1.15
billion and $1.2 billion as a result of the sale, while costs
would be reduced by $750 million to $825 million. Analysts have
been looking for 2013 revenue of about $11 billion, according to
Thomson Reuters I/B/E/S.