Transocean served with Brazil drilling injunction

Thu Sep 27, 2012 10:29pm EDT
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By Braden Reddall

(Reuters) - Transocean Ltd (RIG.N: Quote) said on Thursday it was served with a preliminary injunction by a federal court in Brazil that would require the drilling contractor's nine rigs operating in waters off the country to cease operations in 30 days.

The ban stems from an oil spill last November in an offshore field operated by Chevron Corp (CVX.N: Quote) at a well drilled with a Transocean rig. The eight other Transocean rigs in Brazil work for Petrobras (PETR4.SA: Quote), including seven contracted to the state-led oil company and another subcontracted from BP (BP.L: Quote).

If not overturned, the ban could seriously disrupt exploration and drilling in one of the world's most promising offshore oil frontiers by removing about 13 percent of Brazil's drilling fleet.

Petrobras Chairwoman Maria das Gracas Foster has said that a lack of drilling rigs, even with Transocean's rigs operating, is one of the reasons production growth at her company has stalled despite a $237 billion, five-year expansion plan, the world's largest corporate spending program.

The Transocean ban is related to civil lawsuits seeking about $20 billion in damages from Transocean and Chevron for the spill in the Frade field, which leaked 3,600 barrels of oil into the sea northeast of Rio de Janeiro.

Transocean said it was "vigorously pursuing" a reversal of the injunction, including an appeal to the Superior Court of Justice. "Absent relief from the courts, Transocean will be required to comply with the preliminary injunction," it added.

The world's largest offshore rig contractor warned two weeks ago, after the ban was upheld on appeal, that it could not be sure of overturning the decision in time to prevent its rigs going to zero revenue for some period of time.

Shares of Transocean, which earns 11 percent of its revenue in Brazil, declined by about 1 percent after the ruling, ending 1.7 percent lower at $45.37, on concerns that the average fourth-quarter earnings estimate of 90 cents per share might be at risk.   Continued...