Transocean delays earnings for large write-down

Transocean Ltd., one of the biggest offshore oil drilling companies in the world, said it would take $2.8 billion worth of charges when it reports its third-quarter results, as the company recognizes a drop in the value of its business.

 
The Switzerland-based company took the unusual step of delaying its earnings report to investors and regulators on Friday, saying executives need more time to calculate the new numbers.
The company later Friday said that it will report its September-quarter earnings Monday morning. It will hold a conference call with investors at 8 a.m. ET.
Transocean drills offshore oil and gas wells for energy companies and has one of the largest fleets of deep-water rigs in the industry.
Plummeting oil prices in recent months have many energy companies trimming budgets for new wells and dialing back the amount they spend on exploring for new oil and gas reserves.
Transocean shares fell sharply in premarket trading when the news was announced, but were essentially flat at $29.89 a share by midday. The company’s stock is down nearly 40% so far this year.
Wells Fargo analysts said the charges were “obviously negative but also not a huge surprise.”
The company said it would take a $1.97 billion write-down for the impairment of goodwill, and expects an additional $788 million impairment of its deep-water rigs, reflecting a decline in the rates companies are willing to pay Transocean and a weaker market outlook.
The company was planning to release third-quarter financial results on Friday and hold a conference call with analysts, but it called off both saying it needs more time “due to the complexities involved in determining these impairments.”
Analysts surveyed by Thomson Reuters were expecting a quarterly profit of 73 cents a share on sales of $2.12 billion.
Transocean’s move comes as falling oil prices have weighed on many energy stocks in recent weeks. Billionaire activist investor Carl Icahn blamed companies like Transocean and Chesapeake Energy Corp. for a $270 million l oss by his portfolio during the third quarter.
Transocean has been restructuring its operations, including putting some of its rigs and other assets into a master limited partnership, under an agreement reached with Mr. Icahn. The MLP, Transocean Partners LLC, went public in July with an offering of 17.5 million units priced at $22 each.
MLPs are traded like stocks, but the companies generally pay out most profits to investors in the form of a dividend-like payment. Many investors like the distributions because they aren’t usually taxable until units in the MLP are sold.
The last time Transocean took fair value impairment charges was in 2012 for the sale of jack-up rigs that drill in shallow water, according to Evercore ISI, an investment bank advisory firm. This new round of impairment charges will weigh on Transocean’s stock price, said Evercore, which continues to recommend investors sell the stock. The company is likely to idle some of its floating rigs or even scrap them, Evercore warned.
Transocean operated the offshore Deepwater Horizon rig that BP PLC was using to drill in the Gulf of Mexico when it exploded and created a massive oil spill in 2010. The company paid $1.4 billion last year to settle all federal claims relating to that accident. A federal judge ruled recently that BP was grossly negligent in causing the oil rig explosion, and assigned lesser blame to Transocean and oil-field service company Halliburton Co.