NEW YORK (TheStreet) -- Transocean (RIG) - Get Transocean Ltd. Report stock is plunging 7.20% to $9.54 in afternoon trading on Monday after the Swiss offshore drilling company announced the early termination of a rig contract.
Murphy Oil Corp. (MUR) subsidiary Murphy Exploration & Production Co. - USA terminated the contract for the ultra-deepwater drillship Discoverer Deep Seas for an undisclosed amount. The contract was scheduled to end in November.
"We estimate that the cancelled contract will generate a lump-sum payment of approximately $130mm based upon an estimate of the remaining gross margin generation, undiscounted," Citigroup analysts said, according to Barron's.
"With no contract on the horizon, there is an increased likelihood that the rig is cold stacked, which in turn increases the likelihood that it never returns to service," analysts added, Barron's noted.
Shares of Transocean were also declining because weak oil prices, which continue to fall as oil-producing countries fail to agree on production cuts and oversupply grows, Reuters reports.
WTI crude is down 2.59% to $30.09 per barrel on the New York Mercantile Exchange, while Brent crude is decreasing 3.02% to $33.03 per barrel on the Intercontinental Exchange this afternoon.
Separately, Transocean has a "sell" rating and a letter grade of D+ at TheStreet Ratings because of its generally disappointing stock performance and weak operating cash flow.
You can view the full analysis from the report here: RIG
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.