Transocean has a third of deepwater rigs seeking 2014 work


Transocean Ltd offered some hard rig numbers that validated industry concerns about slack demand for certain oil and gas work, saying on Thursday its deepwater units would represent more than a third of all those available for hire next year. Shares of Transocean, owner of the world's largest offshore drilling fleet, fell more than 3 percent. Executives said 14 Transocean deepwater rigs would be come off contract in 2014 out of a total of 39 industry-wide. Both figures are unusually high in a market segment where leases can run for five years or more, though two-thirds of the total only needed contract extensions, as opposed to brand-new deals. Among rivals, Ensco Plc will have eight rigs coming available in 2014 and Seadrill five, Transocean told analysts at a meeting in New York. But there was pent-up demand for 10 to 15 rigs in the West African deepwater market alone, where programs were held up by delays, according to Terry Bonno, Transocean's senior vice president for rig marketing. In this cyclical business, customers often strategically wait for over-supplied markets before pressing ahead with drilling, in order to secure long-term contracts at lower rates, she said. Referring to the deepwater market in the near term, Bonno cited a customer as saying recently: "There's a cold wind blowing." Long term, however, Transocean cited predictions for 1,250 deepwater wells to be drilled in 2025, compared with about 500 this year. To meet this, there are 110 new rigs under construction, but about 120 were due to be replaced, and Bonno saw potential for 215 additional deepwater rigs to be built. Transocean shares were down 3.6 percent at $51.99 in morning trading on the New York Stock Exchange. The stock gained 10 percent in the past two weeks in the wake of strong quarterly results, an increased dividend and plans for more cost savings and a tax-efficient asset vehicle. That unit, structured along the lines of a master limited partnership (MLP), would launch in mid-2014 and start with three or four Transocean rigs, with potential to add one more per year later, said Chief Financial Officer Esa Ikaheimonen. The CFO, who launched such a vehicle at Seadrill a year ago before moving to Transocean, also laid out plans for renewing the fleet. Transocean deepwater rigs, for example, are on average 14 years old, compared with three years at Seadrill, based on Seadrill figures from earlier this year. Divestments of Transocean's "non-core" rigs would be complete by 2018, he said, while $1.5 billion to $2 billion would be spent annually on replacing them with one or two floating rigs and multiple shallow-water "jackups" every year.



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