Brazil court allows injunction against Transocean
BY JEFF FICK AND ALISON SIDER
HOUSTON--A Brazilian appeals court has denied a request by the national oil regulator to suspend an injunction barring Transocean Ltd. and Chevron Corp. from operating in the country, Transocean Chief Executive Steven Newman said on a conference call Wednesday.
The court responsible for the case couldn't yet confirm the ruling.
Transocean shares were trading down 0.26% at $46.49 Wednesday afternoon.
A Brazilian court banned the two companies from operating in the country in late July because of their roles in an offshore oil spill last year.
"This is very disappointing, as we believe the injunction order is unwarranted and is flawed legally and procedurally," Mr. Newman said. "Let me assure you that the technical merits of our case are strong, and we are pursuing the many avenues available to us to appeal the preliminary injunction."
Brazil's National Petroleum Agency, ANP, sanctioned Chevron and said it would fine the company for any wrongdoing relating to the spill. The ANP cleared Transocean.
The agency requested that the court suspend the injunction.
Despite the incident, ANP officials have said they would meet with Chevron to discuss restarting output at the Frade field, which the company voluntarily shuttered in March.
A spokesman for Chevron didn't respond immediately to a request for comment.
Mr. Newman said Wednesday the court hasn't yet served the company with the injunction and Transocean's rigs are still under contract--the company has 10 rigs in Brazil.
Under the terms of the injunction, Transocean would have to cease activity within 30 days from the date of service.
Guy Cantwell, a spokesman for Transocean, said despite the recent court decision, there are still avenues for the company to contest the injunction.
"We will use all available resources to prevent a shutdown, even temporarily, of Transocean's operations in Brazil," he said in a statement. He said Transocean's crews and equipment functioned correctly and weren't to blame for the spill.
Mr. Newman said that if the injunction does go into effect without a successful appeal or intervention, he didn't think it would mean the end of the Transocean's contracts in Brazil, though its rigs would stop bringing in money.
"I think the worst-case scenario is that we go to a zero rate environment and the customers don't terminate the contracts," he said.
But that scenario still "doesn't look pretty" for Transocean, which earns about 11% of its revenue in Brazil and would continue to incur costs keeping its rigs ready to work at a moment's notice, Mr. Newman said. Transocean earned $2.575 billion in revenue in the second quarter.
State-run oil giant Petrobras has contracts with Transocean rigs and has continued to support the company, Mr. Newman said. Mr. Newman said the company had received "unprecedented" support from its customers.
Dow Jones Newswires