Transocean CEO steps down, dividend slashed on oil slump

Vernier

THE chief executive of Transocean, one of the world's top offshore drilling companies, is stepping down and the company is slashing its dividend as business slows on tumbling crude oil prices.

Transocean said on Sunday that chairman Ian Strachan, who previously held executive positions at Exxon Mobil and Rio Tinto PLC, will serve as interim chief executive officer until a replacement is found for departing CEO Steven Newman.

Transocean's shares have fallen 76 per cent since Mr Newman took over as CEO in 2010.

The company did not say when it would name a permanent successor to Mr Newman, who also decided to quit as a director. CEOs of energy companies often retain board seats after they resign. His unexpected departure comes as analysts say a wave of consolidation is inevitable in the energy sector as sinking prices cause an uptick in merger activity.

Transocean's board also recommended lowering its annual dividend of US$3 a share by 80 per cent to 60 US cents a share, as it tries to conserve its capital.

Often seen as a last resort, companies typically are loathe to cut dividends. But the more than 50 per cent slide in crude oil prices since June to US$50 a barrel has forced oil and gas companies to trim spending on offshore exploration.

The offshore sector had been struggling before the latest price downturn as exploration and production companies turned their attention to the US onshore shale boom.

UBS had said in January that Transocean needed to trim or eliminate its dividend and this month Diamond Offshore Drilling axed a special dividend.

Noble Corp has halved its capital budget for 2015 but said it would maintain its dividend. Among the small universe of offshore drilling companies, analysts have said that Ensco Plc's annual divided is among the safest.

Transocean had reached an agreement under pressure from activist investor Carl Icahn in 2013 to boost its dividend and cut costs, ending a months-long proxy battle. At the time, big oil companies were still spending heavily on expensive deepwater exploration work.

Exploration companies typically pay US$500,000 a day to have rigs such as those owned by Transocean look for oil thousands of feet below the ocean floor.

Mr Newman, who joined the company in 1994, led the Switzerland-based company through the deadly Deepwater Horizon oil spill in the Gulf of Mexico in 2010. Transocean owned and operated the Deepwater Horizon rig that burned and sank during the blowout of BP Plc's Macondo well, the biggest offshore spill in US history.

The incident resulted in the company paying the US government US$1 billion in civil penalties. REUTERS