(Bloomberg) -- Transocean Ltd., the worst performer in the Standard & Poor’s 500 Index last year, may see its $9.1 billion debt downgraded to junk status as the owner of the world’s largest fleet of offshore rigs contends with a “prolonged” downturn in the industry, Moody’s Investors Service said.
“The rapid drop in oil prices and the resulting deterioration of the market conditions for offshore drilling contractors has elevated the risk profile for the company,” Stuart Miller, vice president for Moody’s, said in a statement today. The ratings company has had a negative outlook on Transocean since May 2012.
During the next three years, the Vernier, Switzerland-based company has large spending commitments to build new rigs as the prices it can charge producers to use its rigs fall and existing contracts come to an end. A glut of new vessels is competing for less work as customers throttle back spending amid collapsing oil and natural gas prices.
The company boosted its dividend last year to 75 cents a quarter, after fighting off a challenge from billionaire investor Carl Icahn.
Junk status would increase costs if the company orders more rigs in the future, said Rob Desai, an analyst at Edward Jones in St. Louis who rates the shares a hold and owns none.
Transocean fell 2 percent to $16.50 at 3:20 p.m. in New York. Pam Easton, a company spokeswoman, didn’t immediately return phone and e-mail messages seeking comment.
Brent crude, the international benchmark, traded at $51.14 a barrel today, less than half its June high and the lowest in more than five years.
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