Transocean Issues Update on Cost-Reduction Initiative
Concurrent with Transocean Ltd's. (NYSE: RIG) (SIX: RIGN) divestiture of 38 low-specification rigs in the fourth quarter of 2012, the company commenced an organizational efficiency initiative. This initiative is intended to align the company's shore-based support infrastructure with the post-divestiture size, composition and geographic location of its fleet and represents an initial phase in the company's ongoing plan to improve operating margins. This restructuring is expected to result in a more efficient and focused organization that delivers the highest level of support to the company's rig operations without compromising safety or operational integrity.
Based on preliminary analysis, the company currently anticipates achieving annualized savings associated with this initial phase of our cost reduction initiative of approximately $300 million. Onshore support costs are reported principally in operating and maintenance expense and, to a lesser extent, as general and administrative expense on the company's statement of operations.
The expected reduction in onshore costs includes, among other items, the consolidation of facilities, the streamlining of business functions and processes, as well as elimination of processes, programs and tasks that are not central to supporting the company's core business of operating our rigs safely, efficiently and in a manner that exceeds our customers' expectations. As part of this cost reduction initiative, the company anticipates that certain shore-based positions will be eliminated, a process that has commenced and will continue over the next several months.
Transocean (NYSE: RIG) does not anticipate realization of a material benefit from the organizational efficiency initiative in 2013 as any reduction in overhead costs are expected to be offset by restructuring costs and expenses. The company expects to begin to realize the cost savings associated with this shore-based initiative in early 2014.
With the objective of achieving additional efficiencies beyond those associated with the company's shore-based support infrastructure, Transocean continues to review its entire cost structure, including its offshore and project operations, with the target of further improving its operating margins to be more aligned with its peers, after adjusting for fleet composition and geography, among other items. Both the onshore organizational efficiency initiative and the offshore operations initiative are expected to improve Transocean's competitiveness.
The company will provide additional periodic updates on its cost reduction plans and progress as they are implemented and will address the progress-to-date more specifically when the company discusses its first quarter 2013 results on May 9, 2013.
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