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Weathering The Financial Crisis Essay

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Transocean LTD: Weathering the Financial Crisis Headquartered in Vernier, Switzerland Transocean Ltd (RIG) is the largest offshore oil drilling companies in the world. RIG is traded on the New York Stock Exchange (NYSE) and on the Swiss exchange (SIX). Its market capitalization of $5.06 billion on the NYSE makes it the largest by capitalization among its peers (Yahoo, 2015). It contracts its offshore rigs, drilling equipment and personnel to oil and gas companies around the globe. RIG specializes in “deepwater and harsh environment drilling services” with its fleet (as of October 2015) of 62 floating drilling rigs (Transocean, 2015a, p. 2). Established in 1996, Transocean was created by the acquisition of Transocean ASA by Sonat Offshore …show more content…

In response, the Federal Reserve Bank pumped large amounts of capital into the banking system. However by September 2008, Lehman Brothers, one of the largest international US banks, collapsed; the contagion quickly spread to other countries around the globe (Davies, 2014). Effects of the Credit Crisis on Transocean Transocean’s operating revenues remained strong throughout 2007 and 2008, approximately doubling year over year from 2006 to 2007and 2007 to 2008 (see Appendix A for Transocean’s 2006-2009 financial statements). Oil prices peaked in July of 2008 (see Appendix B for historical Brent Crude prices) when demand dropped due to the global economic turndown, resulting in Transocean’s revenues declining by 21.32%. However, by the fourth quarter of that year revenues had rebounded above same quarter in the previous year (Transocean, 2009). Credit access and any increase in cost of credit during the credit …show more content…

The merger was structured as an acquisition by Transocean. This merger likely helped Transocean as it would have decreased competition as well as adding additional contracts and backlog to the company (Transocean, 2009). Transaction, economic, translation, and country risk exposures faced by RIG during the global credit crisis. Transocean manages risk by invoicing in U.S. dollars (functional currency) and local currencies. The receipts of local currencies are adjusted to meet planned local expenditures, thereby reducing transactional exposure. Transactional exposure is limited to the difference between planned and actual requirements. In general Transocean reports no material effect on operating performance (Transocean, 2009). Transocean’s Current Financial Performance Current performance of Transocean Subsequent to the credit crisis demand for oil began to accelerate and supplies to decline in turn increasing global demand for drilling and exploration (see Appendix B), creating a global rush to develop oil fields. Transocean benefited from this upsurge in demand; however, by 2014 production especially in the U.S. soon out stripped demand and Transocean’s fortunes

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