GO
Loading...

Newest Challenge for Oil Rigs: Getting Financing

off shore oil rig
off shore oil rig

It should come as little surprise that the financing market for the billion-dollar oil drilling rigs like the Deepwater Horizon—owned by Transocean —is starting to see signs of serious strain due to the enormous amount of oil spewing into the Gulf of Mexico.

The lawyers and bankers who deal in this here-to-fore obscure, but large marketplace, tell me it’s only in the last week or two that they are seeing trepidation on the part of the banks that back the construction of these giant oil drilling rigs.

The rigs themselves are typically constructed in China and South Korea; now the banks that provide the money for their construction have begun to take a serious interest in that process, going so far as to start touring the factories where they are built, according to people involved in these financing deals.

It’s unclear whether the money for construction will dry up, but it seems certain to stop flowing so fast.

There’s also a concern that many rigs already slated for the Gulf of Mexico will no longer be needed there, bringing down the value of any rigs that are in-process.

Also, it is important to note that the Deepwater Horizon, which continues to gush for 46 days and counting, has three stakeholders: BP , Anadrako Pertroleum and Mitsui of Japan.

For more background information, see Bloomberg's BusinessWeek article: Mitsui, Japan Drilling Drop on BP Oil Spill Fallout.

_____________________________

_____________________________

More from The Faber Report:

thefaberreport.cnbc.comand now on Twitter @DAVIDFABER_CNBC

Programming Note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, begins Monday, June 7 at Noon ET on CNBC.

strategysession.cnbc.com


Questions? Comments? Write to faberreport@cnbc.com.

Symbol
Price
 
Change
%Change
APC
---
BP.
---
RIG
---
8031.T
---
AAPL
---