Transocean is taking a US$1.4 billion impairment in Q3 2017 following the drilling contractor’s decision to scrap five ultra deepwater floaters, and one deepwater rig.
The Sedco Express ultra deepwater floater will be scrapped. Image from Transocean.
All six rigs, which were previously cold stacked, include: ultra deepwater floaters GSF Jack Ryan, Sedco Energy, Sedco Express, Cajun Express, and Deepwater Pathfinder; and the deepwater Transocean Marianas vessel.
According to Transocean, the rigs will be classified as held for sale and will be recycled in an environmentally responsible manner. The company take an impairment charge of about $1.4 billion during Q3 as a result of the scrapping.
“We continue to enhance the quality of our fleet through the addition of new, high-specification assets, and the retirement of older, less competitive rigs,” says Jeremy Thigpen, Transocean president and CEO.
“We remain committed to providing our customers with the most technically capable and highest quality ultra deepwater and harsh environment assets in the industry, and will continue to objectively evaluate our rigs and high-grade our fleet as the market evolves,” he said.
Earlier this week, Chevron axed its drilling contract with Transocean for the Discoverer Clear Leader ultra deepwater drillship, which has been working for the US supermajor in the Gulf of Mexico since November 2014. The termination becomes effective in November, nearly a year earlier than its original expiration date of October 2018. Transocean will receive a lump sum payment of about $148 million in contract termination fees.
Last month, Transocean announced it entered a deal to buy Songa Offshore in a $3.4 billion deal, in which the company will acquire four Cat-D harsh environment, semisubmersible drilling rigs on long-term contracts with Statoil in Norway; and Songa’s three semisubmersible drilling rigs.
With the merger, which is expected to close later this year, the combined companies will now have 45 offshore mobile offshore drilling units, consisting of 25 ultra deepwater floaters, 11 harsh environment floaters, two deepwater floaters and seven midwater floaters.
Transocean also has four ultra deepwater drillships under construction, two of which are under contract with Shell for 10 years each.
In the Q2 period, Transocean reported it had reactivated rigs, extended contracts, and created opportunities to work with old and new customers. The company had also identified multiple bidding opportunities globally, finding almost 60 floater programs that could begin within the next 18 months.