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Transocean takes $1.4bn hit as rigs scrapped

Drilling giant to book impairment as six deep-water floaters head for recycling

Transocean is to book an impairment of $1.4 billion as the rig giant prepares to send a quintet of ultra-deepwater floaters and another rig for recycling.

The six floaters have all previously been stacked and will be "recycled in an environmentally responsible manner," the drilling giant said on Friday.

The five ultra-deepwater floaters to be scrapped are the semi-submersibles Sedco Express, Sedco Energy and Cajun Express and the drillships Deepwater Pathfinder and GSF Jack Ryan.

The Transocean Marianas, a deep-water semisub that can drill in water depths of 7000 feet to a drilling depth of 30,000 feet, is also being retired.

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The Cajun Express can drill in waters of 8500 feet to a drilling depth of 35,000 feet. The Sedco Express and Sedco Energy can drill to the same depth, but in waters of up to 7500 feet.

Both the Pathfinder and Jack Ryan can drill in waters of up to 10,000 feet to a drilling depth of 35,000 feet.

Transocean said the $1.4 billion of impairments associated with these retirements will be booked in the third quarter.

Chief executive Jeremy Thigpen said: "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.

"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."

Earlier this week Transocean saw US supermajor Chevron terminate its long-term contract for its deep-water drillship Discoverer Clear Leader around a year earlier. The unit has been working in the US Gulf of Mexico for the oil giant on $575,000 a day since the original contract started in November 2014.

The contract was due to end in October next year but will be cut from November this year after wrapping up operations at the Gator Lake wildcat.

Chevron will pay Transocean a lump sum payment of about $148 million in termination fees, which is the present value of the operating dayrate less the operating costs per day.