Concurrent with Transocean Ltd's. RIG 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 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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