Transocean to book charge of over $600 million for sale of two deepwater assets

By Tomi Kilgore

Charges booked will be nearly double the expected proceeds from the sales, which will be used to pay down debt

Shares of Transocean Ltd. were sinking toward a 20-month low Tuesday, after the oil-services company said it expects to book impairment charges of more than $600 million for the sale of assets.

The company (RIG) disclosed that a subsidiary had reached agreements to sell the Development Driller III ultra-deepwater, semi-submersible rig and associated assets to an undisclosed third party for $195 million.

Transocean also said it was selling its Discover Inspiration ultra-deepwater drillship for $147 million.

As a result, the company said it expects to record an estimated charge of between $630 million and $645 million in the third quarter.

The sale of assets are expected to close in the third quarter. Transocean plans to use "substantially all of the proceeds," which should be $342 million, to pay down debt.

The stock dropped 2.6% in morning trading, which put it on track for the lowest close since Jan. 5, 2023.

Chief Executive Jeremy Thigpen had said in its second-quarter report released a month ago that the company's focus remained on optimizing its portfolio of assets and generating free cash flow, which can be used to improve its balance sheet by lowering its debt levels.

As of June 30, the company had $6.78 billion in long-term debt and $526 million in debt due within one year.

Meanwhile, Transocean, which had a market capitalization of $4.15 billion as of Friday's close, has reported net losses for at least the past 21 quarters, according to available data provided by FactSet.

Debt rating agency S&P Global Ratings has a credit rating for Transocean of CCC+, which is seven rating notches deep into speculative, or "junk," territory.

Transocean's stock has tumbled 27.3% year to date, while the VanEck Oil Services ETF OIH has lost 6.1% and the S&P 500 index SPX has rallied 17.5%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-03-24 0950ET

Copyright (c) 2024 Dow Jones & Company, Inc.