Transocean Scraps Rigs, Offshore Drilling Woes

Switzerland-based Transocean announced that it plans to dismantle four of the company’s offshore drilling rigs to be scrapped. The company has also announced that it stacked (mothballed) another four deep-water vessels that had been kept idle. Transocean is expected to pay $300 to $325 million in non-cash charges during the first quarter. According to the company, the rigs will be dismantled in an environmentally friendly way. This brings the number of rigs Transocean intends to scrap to 16.

The company currently owns approximately 68 offshore rigs, but it has been reported that 50 to 60 percent of those vessels could be idle this year. Since last June, Transocean’s shares have plummeted nearly 60 percent.

Other offshore drilling companies are not faring any better. Since the oil prices for a barrel of Brent crude have continuously risen, new offshore exploration for oil and gas has come to a halt. The low crude prices have made the cost of starting a new drilling project hard to justify with a reasonable rate of return out of sight.