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 Too steady, perhaps.
Since Sunday Newman, 50, is out of work. People inside and outside
the company say his abrupt departure reflected in part the board's
view that the 20-year company veteran was too conservative and
lacked a bold vision for a period of dramatic industry change that
began at the end of the last decade.
Newman also had to contend with two members of the 12-member board
who represent activist investor Carl Icahn, who demanded a big
dividend increase in 2013 and then saw it slashed by 80 percent this
month in response to a sharp market downturn.
Icahn did not return phone calls and Newman could not be reached. A
Transocean official declined to comment.
It is not clear what investors such as Icahn might have in mind for
the company.
For now, according to one banker and other sources, Transocean does
not appear to be a takeover target because it is too large to be
swallowed by nearly any one of its competitors. According to a
Transocean presentation, its fleet is about 25 percent larger than
its biggest rivals, Ensco Plc and Seadrill Ltd, which are also
grappling with the downturn.
Newcomers, the sources said, would also have trouble gaining entry
into the highly technical and risky world of offshore drilling.
Transocean shares have fallen almost 80 percent since Newman took
over in March, 2010. By comparison, the PHLX Oil Services Index rose
1.5 percent in the same period.
Some of the stock battering can be traced back to the fallout from
the worst offshore oil spill in U.S. history caused by the deadly
explosion and sinking of its Deepwater Horizon rig leased for BP
Plc's Macondo well.
Newman's departure and the dividend cut could also be seen as
casualties of a 50-percent slump in crude prices since mid-2014.
However, Transocean current and former employees and analysts also
point to poor timing of some strategic moves and a slow response to
the onshore shale oil revolution that began six years ago and
overlapped with much of Newman's five-year term.
Reeling from litigation over the BP well blowout, Transocean was
slow to build new rigs, failing to capture new business during an
upswing in prices and now left paying for unfinished rigs when crude
prices and lease rates are sharply down.
During that time, the company, which built its reputation on
performing Herculean jobs, such as record-setting drilling in 12,000
feet of water to depths of 40,000 feet, began losing its edge to
smaller, nimbler rivals.
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Under Newman, the Swiss-domiciled company took a long time to deal
with a vast oversupply of offshore rigs as a result of a rapid rise
in cheaper and more accessible U.S. shale oil drilling.
Only in May 2014, just a month before oil prices began their slide,
Transocean said in a filing it planned to create a new entity to
later spin off eight of its units in the UK North Sea. That plan was
shelved in November.
In January, the company said it had scrapped or would scrap 12 older
drilling units from the fleet of 71 units it owns or operates.
Analysts expect additional costly scrappings.
It remains an open question within the company whether the board
will pick Newman's successor from within our look for a
"transformational" leader from outside, one source said.
"You do need somebody that can adapt to that new environment," said
Rob Desai, oilfield service analyst at Edward Jones in St. Louis.
There is no easy fix. Transocean's fleet is already half the size it
was in 2010. And even more nimble rivals such as Atwood Oceanics
Inc, which has a fleet of around 14 units, have seen lease rates
come under pressure.
In the short-term analysts say Transocean may need to tap loans or
issue shares as it faces nearly $2 billion in debt maturing in the
next 18 months, while investing to renew its fleet.
"I think they are recapitalization candidate. So they are going to
be playing defense here for a while," said Bill Herbert, managing
director at Houston-based energy focused investment bank Simmons &
Company, which rates the stock underweight.
At least one big investor is betting on a rebound in Transocean
shares. Soros Fund Management LLC, the hedge fund of George Soros,
bought a small stake of 149,000 shares of Transocean in the fourth
quarter, according to a securities filing..
(Additional reporting by Jennifer Ablan and Mike Stone in New York;
Editing by Tomasz Janowski)
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