Transocean $1.4 Billion Gulf Spill Deal Lures Investors

January 4, 2013

According to a January 4 Bloomberg report, Transocean Ltd. (RIG)’s agreement to pay $1.4 billion in penalties for its role in the worst U.S. maritime oil spill frees the world’s largest offshore driller to attend to rising competition in deep-water rig markets.

Transocean will plead guilty to one misdemeanor count of violating the Clean Water Act as owner of the Deepwater Horizon rig that drilled BP Plc (BP/)’s ill-fated Macondo well off the Louisiana coast in 2010, according to a filing yesterday in federal court in New Orleans. The company is scheduled to be arraigned on the charge Jan. 9.

The Vernier, Switzerland-based driller will pay a $400 million criminal fine and $1 billion in civil penalties plus interest for the calamity that killed 11 workers, spewed millions of barrels of crude into the sea, and halted fishing for months across a Nebraska-size swath of the Gulf of Mexico, according to Bloomberg.

Transocean shares surged the most in 28 months after the settlement was announced yesterday and yields on company debt fell, signaling rising investor demand. A “significant valuation recalibration” is in order for Transocean’s stock now that most of the uncertainty about potential liabilities for the Macondo accident has been resolved, said James C. West, an analyst at Barclays Capital Inc. in New York.

“The painful lesson learned for Transocean and these other companies involved in deep-water exploration is that going forward they have to put the environment ahead of profit,” said Laurence Balter, who helps manage $100 million, including Transocean shares, at Oracle Investment Research in Fox Island, Washington.
Largest Gain

Transocean rose 2.3 percent to $50.32 at 9:35 a.m. in New York Stock Exchange composite trading. Yesterday, the stock increased 7.9 percent for the largest intraday gain since September 2010.

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