As Oil Prices Drop, Rigs Go Off-Line

Transocean Ltd, the owner of the world's largest offshore drilling fleet, said it was likely to retire additional rigs as the company continued to face pressure due to slowdown in an oversupplied rig market.

The drilling contractor's shares rose as much as 3 percent in early trading after the company reported better-than-expected quarterly results on Monday.

The recent slide in oil prices has weighed on demand for offshore services as oil and gas producers cut costs.

Day rates for offshore rigs are expected to drop further over the next few quarters as oil companies shy away from expensive production.

Analysts believe the offshore industry will remain over-supplied for the next one to two years, as rigs ordered during the previous boom hit the sea.

Transocean, which was scheduled to report results last Thursday, recorded impairment charges of $2.62 billion in the third quarter ended Sept. 30 due.

The company reported net loss of $2.22 billion, compared with a profit of $546 million a year earlier.

Excluding items, it earned 96 per share, higher than the 89 cents analysts expected on average, according to Thomson Reuters I/B/E/S.

Transocean also said it would not pursue a private placement of shares of Caledonia Offshore Drilling, given the current market conditions

"(The placement) would have provided the company with another source of liquidity to address its upcoming debt maturities," Barclays analyst Harry Mateer said in a note.

The company, however, will report Caledonia as a standalone entity from the current quarter and maintain the option to pursue a divestiture later.

"The company will continue to assess the competitiveness of non-core assets on a case-by-case basis," Chief Executive Steven Newman said on a conference call.

Transocean's shares were up 1 percent at $29.99 on the New York Stock Exchange on Monday, after touching a high of $30.58.

(Reporting By Kanika Sikka in Bangalore; Editing by Joyjeet Das)