World's largest offshore drilling contractor
) is set to attend a hearing before a federal judge in New
Orleans on February 14, 2013 related to the Gulf of Mexico oil
spill in 2010. The federal judge will decide whether the criminal
settlement of Transocean with the Justice Department can be
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The Deepwater Horizon drilling rig that sank after an explosion
on April 20, 2010 while operational on the Macondo exploration
well proved fatal for 11 workers and leaked 4.9 million barrels
of oil into the Gulf over 87 days, polluting shores from Texas to
Florida. The drilling rig was leased by British energy major
) from Transocean. The incident was a major environmental
disaster in the U.S. history. Last week, Transocean agreed to pay
more than $1.4 billion as a settlement fee, which includes $400
million in criminal penalty and $1 billion plus interest in civil
penalties. Moreover, the company also pleaded guilty to one
misdemeanor count under the Clean Water Act.
Transocean will enter into its guilty plea deal on February 14,
2013 - scheduled by a U.S. District Judge named Jane Triche
Milazzo. She will decide on that day whether the deal can be
accepted. If the deal is rejected, Transocean can go for a trial
by withdrawing its guilty plea. However, the company's civil
settlement with the federal government will be looked after by a
Switzerland-based Transocean is the leading provider of drilling
management services worldwide. As of June 30, 2012, the company
owned, had partial ownership interests in, or operated 130 mobile
offshore drilling rigs. Transocean's drilling fleet consists of
50 high-specification deepwater floaters, 25 mid-water floaters,
10 high specification jackups, 44 standard jackups, and one other
rig utilized to support offshore drilling activities worldwide.
Transocean carries a Zacks Rank #3 (short-term Hold). For the
long term, we maintain a Neutral recommendation on the company.
With less oil being discovered on land and with companies having
to dig ever deeper to get to their reserves, Transocean is poised
to benefit from a market with robust multi-year demand trends,
given its technologically-advanced and versatile drilling fleet.
On the flip side, the introduction of new and more stringent
regulations due to the oil spill will likely make deepwater
drilling activity prohibitively expensive for exploration and
production companies, making many projects marginal. This could
reduce the demand for deepwater drilling.