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Global offshore drilling giant Transocean Ltd. (RIG - Analyst Report) entered into an agreement with Shelf Drilling International Holdings Ltd. for the sale of 38 shallow water drilling rigs. The transaction will fetch Transocean approximately $1.05 billion.

Dubai-headquartered Shelf Drilling – a company recently formed through equal sharing by Castle Harlan Inc., CHAMP Private Equity and Lime Rock Partners – will make cash payment of about $855 million, while the remaining $195 million will be paid through seller financing. Seller financing will involve issue of preference shares by a subsidiary of Shelf Drilling.

Subject to certain conditions and approvals, the deal is expected to be completed in the fourth quarter of 2012.

Transocean stated that its third-quarter 2012 results will reflect non-cash impairment charge related to the long-lived assets or goodwill associated with the assets. With this disposition, the company aims to re-design its asset base with a focus on high-specification floaters and jackups that will likely enhance Transocean’s long-term competitive structure.

As of June 30, 2012, Switzerland-based Transocean owned, had partial ownership interests in, or operated 130 mobile offshore drilling rigs. Transocean’s drilling fleet consists of 50 high-specification deepwater floaters, 25 mid-water floaters, 10 high specification jackups, 44 standard jackups, and one other rig utilized to support offshore drilling activities worldwide. Additionally, the company had 2 ultra-deepwater drillship and 3 high-specification jackups under construction.

The company’s fleet is considered to be one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. Transocean’s drillships are contracted by oil biggies such as Chevron Corporation (CVX - Analyst Report), Royal Dutch Shell plc (RDS.A - Analyst Report) and BP plc (BP - Analyst Report).

We are maintaining our Neutral recommendation on the stock, as we see limited upside over the near term. Transocean currently retains a Zacks #3 Rank, (short-term Hold rating).

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