Huddle up? Transocean (RIG.US) and Seadrill (SDRL.US) Discuss Merger

Seadrill (SDRL.US), the offshore drilling contractor, is reportedly in talks with its larger rival Transocean (RIG.US) about a potential merger.

According to reports, a merger with Seadrill would align with Transocean's strategy to increase its backlog of work, using some of the world's most advanced drilling rigs capable of drilling in waters over two miles deep.

Both companies were once the world's two largest offshore drilling companies, but have fallen behind due to the industry's prolonged downturn, which forced many contractors into bankruptcy. The offshore drilling, particularly deepwater drilling, is now again thriving, as oil prices have stabilized and production growth from US shale oil fields has slowed.

Transocean's shares have fallen 35% this year, valuing the company at $3.6bn, while Seadrill's shares have fallen 26% this year, valuing the company at $2.4bn.