Nov 7 Transocean Ltd, the world's largest offshore drilling contractor, is going through a "painful" process to reduce onshore expenses and expects to see a drop in costs next year as a result, executives said.
Chief Financial Officer Esa Ikaheimonen also hinted on Thursday that a change to the capital structure could be in the works through the introduction of a partnership for certain assets, with more details to come later this month.
Shares of Transocean rose more than 5 percent to their highest in more than five months.
The stock had already received a boost from larger-than-expected profits reported late on Wednesday.
Ikaheimonen said his initial estimate for 2014 operating and maintenance costs was $5.5 billion to $5.7 billion, down from an expected $5.7 billion to $5.8 billion this year. About two-thirds of $300 million in anticipated savings from a program to reduce onshore costs would be realized next year, he said on a call with analysts.
"This has been a painful process," Chief Executive Steven Newman said on the call. "We've had to say goodbye to colleagues who have contributed significantly to the company over the years. However, those who remain are extremely enthusiastic about the company's future."
Revenue efficiency, or how much Transocean earns compared with what it could have, is expected to be 94 percent in 2014, up from an expected 92.5 percent this year, said Ikaheimonen, who was brought in from rival Seadrill a year ago.
Ever since, investors have been eager to know whether he would repeat his trick at Seadrill of spinning rigs into a tax-saving financial structure known as a master limited partnership (MLP).
The CFO said on Thursday the conclusions of his evaluation of an MLP for Transocean would be presented to the company's board this month, with an update for investors ready by an analyst meeting scheduled for Nov. 21.
MLPs pay virtually no corporate taxes since they deliver nearly all profits to the MLP unit owners, which trade like stocks. They have traditionally been set up for long-lived assets with steady cash flows, like pipelines and oil wells, but their use is spreading.
The units of Seadrill Partners LLC are up nearly 40 percent since their debut in October 2012.
(Reporting by Braden Reddall in San Francisco; editing by Andrew Hay)