* Will focus on more lucrative shallow-water drilling
* To be paid $1.05 bln, but sees 'significant' loss
* Expects to incur costs of $120 mln to $140 mln
* Most of the old rigs had 30 years or more of service
* In talks to build 4 new ultra-deepwater rigs
By Thyagaraju Adinarayan and Braden Reddall
Sept 10 Transocean Ltd, the world's
largest offshore driller, is selling 38 less-capable rigs to
focus on more lucrative shallow-water units as well as rigs that
work in water more than a mile deep.
Older models are in low demand and face higher downtime,
with maintenance costs cutting into profits. Transocean and
rival Noble Corp have both spent a year and a half
sounding out interest in selling them, and Noble's search
Transocean, while still seeking a buyer for its remaining
standard shallow-water rigs that are out of service, is selling
the 38 rigs for $1.05 billion to Dubai-based private
equity-backed firm Shelf Drilling International Holdings Ltd.
The company said the book value of the rigs it sold was $1.4
billion, higher than what it will receive.
The sale comes three months after sources told Reuters that
Switzerland-based Transocean had put its Middle East "jackups,"
as shallow-water rigs are known, up for sale in a deal likely to
raise $1 billion.
Transocean is now talking to a major oil company
about funding construction of four ultra-deepwater drillships
with a 10-year contract, it said. Transocean also aims to borrow
$500 million to $1 billion to fund its deepwater expansion.
Deepwater wells, in 4,500 feet of water or more, accounted
for more than half the world's new discoveries so far this year,
according to IHS Offshore Rig Consulting, which tracks rig
Earlier on Monday, another contract driller, Rowan Cos Plc
, said it exercised its option to build a fourth
ultra-deepwater drillship with Hyundai Heavy Industries Co Ltd
for about $620 million.
OLD vs NEW
Most of the 38 rigs sold to Shelf Drilling had at least 30
years of service, and all were based outside North America.
Transocean will be left with about 90 rigs, and now as much as
nine more lined up to be built.
Chief Executive Steven Newman said the deal marked an
"important milestone" in its strategy to focus on more capable
rigs and improve the company's long-term competitiveness.
Transocean owned the rig destroyed in the 2010 Gulf of
Mexico oil spill at a well majority-owned by BP Plc. The
disaster, the largest offshore oil spill in U.S. history, led to
stringent safety regulations that increased costs for drillers.
According to a filing on Monday, Transocean is discussing a
$1.5 billion settlement to resolve civil and criminal claims
from the Macondo spill.
The jackup sale was to Shelf Drilling - a new company backed
by private equity firms Castle Harlan Inc, CHAMP Private Equity
and Lime Rock Partners - for $855 million in cash and $195
million in preferred shares issued by a Shelf affiliate.
Tudor Pickering Holt Energy Research said the valuation
indicated there were not many alternative buyers, even if it was
good to see noncore assets divested.
Transocean expects to incur between $120 million and $140
million of tax, personnel-related and other transaction costs.
and anticipated a "significant" loss from the deal.
Transocean shares were down 2.3 percent at $46.51 in
afternoon trading on the New York Stock Exchange, despite a rise
in most other oilfield services companies.
Barclays analyst James West viewed the new deepwater rigs
and the "streamlining" sale as positives. Angie Sedita at UBS
said $30 million per rig was a "fair price" and that the assets
only accounted for 5 percent to 6 percent of Transocean profits.
But Brian Uhlmer at Global Hunter Securities noted the lost
earnings were dilutive in the near term. "With that said, all
eyes are on operations now as a leaner, more focused operation
and there is no room for error in downtime for its floaters," he
said in a note.
Transocean may just be glad to have the deal behind it.
Noble Corp Chief Executive David Williams expressed frustration
last week with the difficulties in selling off older rigs, but
insisted that was only because no proposed deal was good enough.
"Some of you have been expecting more to happen faster,"
Williams said on Thursday at a conference in New York hosted by
Barclays. "Unfortunately, the impediment to doing a deal is just
"So that doesn't mean we won't continue to try. It doesn't
mean that we won't apply a different strategy," he added." It
just means we haven't found the right opportunity yet."
On Sunday, Transocean also announced a new chief financial
officer after an eight-month search. Esa Ikäheimonen, a former
CFO at rival Seadrill who spent two decades working
for Royal Dutch Shell Plc, will succeed interim CFO
Greg Cauthen on Nov. 15.