Transocean Ltd. said on Wednesday that a Brazilian court upheld a ruling that would prevent the world’s largest offshore rig contractor from operating in the country because of an oil spill last November.
Prosecutors seeking $20-billion (U.S.) in damages from well operator Chevron Corp. and rig owner Transocean over the 3,600-barrel spill sought the ban to ensure payment.
Brazil’s oil industry regulator, ANP, had tried to prevent the ban on Transocean from taking effect, but Transocean chief executive officer Steven Newman said the Brazils’ Superior Court of Justice denied the attempt.
“This is very disappointing as we believe the injunction order is unwarranted and is flawed legally and procedurally,” Mr. Newman said. “The technical merits of our case are strong and we are pursuing the many avenues available to us to appeal the preliminary injunction and have it suspended.”
Shares of Transocean gave up early gains, and were 0.2-per-cent lower at $46.52 in early afternoon trading on the New York Stock Exchange.
Of Transocean’s 10 rigs in Brazil, seven are contracted to state-run oil company Petroleo Brasileiro SA (Petrobras). The others are the rig that drilled the well for Chevron, one contracted to BP PLC but working for Petrobras, and one hired by Vanco, part of privately held Houston-based firm PanAtlantic Energy Group.
Transocean, which generates 11 per cent of its revenue in Brazil, has not yet been served with the injunction, which goes into effect 30 days after it is served with legal papers, Mr. Newman said.
The CEO said he did not assume Transocean could declare force majeure on the contracts as a result of the injunction, and its rigs would likely stop generating revenue while the company fought the court decision.
“So there is a kind of a worst-case scenario that doesn’t look very pretty,” Mr. Newman said on a conference call with analysts. “But, as I said, we believe strongly in the merits of our case, and I’m confident that we will ultimately prevail.”
Transocean also said that this week’s $1.05-billion sale of 38 rigs would be modestly dilutive to 2013 earnings.
The company said 2013 revenue would decline by between $1.15-billion and $1.2-billion as a result of the sale, while costs would be reduced by $750-million to $825-million. Analysts have been looking for 2013 revenue of about $11-billion, according to Thomson Reuters I/B/E/S.