TransOcean Cancels $550K/Day Rig Conract After Customer Runs Out Of Cash - Bloomberg

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Jan. 12 (Bloomberg) -- Transocean Inc., the world’s largest offshore oil driller, canceled a record $550,000-a-day rig lease and said a second vessel has been idled after the client ran out of cash.

Transocean, based in Switzerland and run from offices in Houston, disclosed the termination of its contract with Burgundy Global Exploration Corp. today in the monthly fleet-status report on its Web site. Calgary-based Oilexco Inc. halted operations aboard Transocean’s Sedco 712 rig after its North Sea subsidiary sought protection from creditors, the report said.

Oil exploration companies are having difficulty borrowing money to lease rigs and hire roughnecks after crude tumbled 74 percent in the past six months and global credit markets seized up, said Truls Olsen, an analyst at Fearnley Fonds AS in Oslo. More contract terminations are imminent as energy prices decline and cash-strapped producers reduce or cancel projects. “We will likely see more of this,” Olsen, who rates Transocean shares a “buy” and doesn’t own any, said today in a telephone interview. “Counterparty risk is on the increase. It’s a matter of whether or not you are able to raise cash.”

Oilexco demobilized the Sedco 712 rig on Jan. 5, two days before a London court appointed administrators to oversee operations of the company’s North Sea unit. The $340,000-a-day contract for the rig that runs through March 2010 “remains in full force and effect,” Transocean said in today’s report.

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http://www.bloomberg.com/apps/news?pid=20601072&sid=axgCv0Fu1aJ4&refer=energy