Transocean Sells Shallow-Water Rigs for $1B

Offshore oil driller Transocean (NYSE:RIG) said Monday that it has inked a deal to sell 38 of its older shallow water drilling rigs for about $1.05 billion as it seeks to focus on the more lucrative ultra-deepwater market with high-specification jackup rigs.

Shelf Drilling International has purchased the shallow-water rigs and Transocean said it will provide the buyer with various transition support services for a period after the deal closes in the fourth quarter.

"This agreement marks an important milestone in our asset strategy to increase our focus on high-specification floaters and jackups, improving our long-term competitiveness," Transocean CEO Steven Newman said in a statement.

The move is an effort to tap the more profitable and efficient high-specification and deep-water rig market that has evolved with the growing demand for offshore drilling.

Transocean also said Monday that it is in talks with a "major integrated international oil company" for the construction of four ultra-deepwater drillships. Each new rig is expected to be able to operate in water depths of up to 12,000 feet and drill wells up to 40,000 feet.

Transocean, which owned the rig responsible for the 2010 BP (NYSE:BP) oil spill in the Gulf of Mexico, said the new deep-water rigs would have a second blow-out preventer system and are expected to be outfitted to accommodate a future upgrade to a 20,000 psi BOP system when such advanced subsea technology is developed.

Transocean, which has not yet signed a formal deal with respect to the new deep-water rigs, estimates that each new build would be contracted with the customer for a 10-year term beginning in 2015 and 2016 following shipyard construction.

Capital investment for the four new rigs is expected to reach $3 billion. The driller said it may borrow up to $1 billion and would be willing to strike alternate deals, such as a joint venture with the customer, to acquire additional funding for the project.