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Lost time may cost Transocean far more than Gulf spill fines

The Macondo oil spill has cost Transocean more than money. The U.S. oil services firm will pay the U.S. government $1.4-billion (U.S.) for its role in BP's Gulf of Mexico disaster in 2010. That's a modest sum. But shares in the $18-billion Transocean have lagged those of rivals in the meantime as it avoided heavy investment.

Thursday's settlement with the government does not entirely draw a line under the Gulf spill for Transocean, which owned the rig concerned – BP is still seeking its pound of flesh. But investors drew comfort from the deal, sending the company's shares up 7 per cent after the announcement and a almost 4 per cent more in Friday midday trading, adding some $1.6-billion to its market capitalization.

For one thing, the fines were slightly less than Transocean had provided for. More importantly, with this deal out of the way the company looks in decent shape: It has a healthy balance sheet with $6-billion of cash and is on track to pump out EBITDA of $4.4-billion in 2013, according to estimates compiled by Thomson Reuters.

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Even so, Transocean's shareholders have suffered more than the owners of any of the other companies involved in Macondo. Its shares are down about 42 per cent since the blowout – more than the 33-per-cent decline in BP's stock. Transocean's stock has also trailed other offshore oil service providers. Shares in rival Noble have drifted just 10 per cent lower, while Seadrill's valuation has climbed 38 per cent since the spill.

One reason is that Transocean has held back on needed investment in state-of-the-art equipment because of the threat of potentially ruinous fines. In 2012 it plowed just 17 per cent of revenue into capital spending, compared with close to half sales at Noble, according to Argus Research. Norway-based Seadrill splurged a third of its revenue on new equipment in the first nine months of 2012.

The spoils in deep-water drilling are going to companies with the latest gear. It could take years for Transocean to catch up with the investments made by rivals. The lost time may prove a far bigger penalty than Uncle Sam's fine.

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