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(Bloomberg) -- Transocean Ltd. will have to do more than slash its dividend by 80 percent for the owner of the world’s largest fleet of offshore rigs to weather the oil price crash, analysts said.

The company is recommending shareholders approve a cut in the annual payout to 60 cents a share from the current $3, according to a Feb. 15 statement. Transocean, which also announced that Chief Executive Officer Steven Newman will step down, boosted the dividend last year after fighting off a challenge from billionaire investor Carl Icahn.

Transocean is facing falling demand for its equipment as producers cut spending amid collapsing oil and natural gas prices. A reduced dividend will shore up its balance sheet, but may not be enough.

“They probably do need to raise capital in some way, as early as the end of this year or next year” Rob Desai, an analyst at Edward Jones in St. Louis who rates the shares a hold and owns none, said in a phone interview. “The dividend’s not the only thing they need” to cut.

Transocean, which will save about $850 million a year from the dividend cut, has nearly $2 billion in debt maturing over the next year and a half, J.B. Lowe, an analyst at Cowen & Co., wrote today in a note to investors. A larger cut was expected, he wrote.

Potential sources of cash could include Transocean issuing more shares, or dropping down ownership stakes in some of its deepwater rigs to tax-advantaged subsidiary Transocean Partners LLC, Angie Sedita, an analyst at UBS AG, wrote today in a note to investors.

CEO Exiting

The company said in a separate statement that Newman will step down as CEO, and Chairman Ian Strachan will take over until a permanent replacement can be found.

During the next three years, the Vernier, Switzerland-based company has spending commitments to build rigs as the price for its equipment falls and existing contracts end. A glut of new vessels is competing for less work as producers reduce spending.

The company may see its $9.1 billion debt lowered to junk status if the drilling downturn is prolonged, Moody’s Investors Service said last month.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net Will Wade, Carlos Caminada

Bloomberg