New Contracts Becoming A Dream For Transocean LTD (NYSE:RIG)

Transocean LTD (NYSE:RIG) has once again disappointed with its latest monthly fleet status report. The report indicates that new contracts are becoming a dream for the company. It has been largely getting its revenues from extension of previous contracts for the past few months. The latest update states that there were no new contracts and contract extensions during the reported period. Additionally, the company reported that the sixth-gen semi-submersible ‘Transocean Barents’, the jackup ‘GSF Galaxy II’ and third-gen semi-submersible ‘GSF Rig 140’ are currently idle.

The highlights

Transocean stated that the projected out-of-service time for this year has moved up by 26 days, while it has declined by 5 days for 2016. With crude prices showing no sign of recovery, demand for rigs has remained poor. Upstream companies have been drastically minimizing exploration capital expenditure to handle pricing issues, which has been increasing problems for driller firms like Transocean. This weakness is projected to continue in 2016. However, the robust backlog position of company amounting to almost $18.6 billion gives a hope to investors. This also allows Transocean to navigate the existing uncertain environment healthier than many of its competitors.

The buzz

On September 8, Transocean and a number of other companies including ENSCO PLC (NYSE:ESV) and Atwood Oceanics, Inc. (NYSE:ATW) presented at the much popular Barclays Energy-Power Conference. Most of the presentations highlighted the existing tough scenario and its impact on the overall performance of the company. Transocean’s CEO Jeremy Thigpen showed excellent insight on the current oil market combined with effective leadership. This leadership of CEO will prove blessing for the company, especially in these troubling times.

The plan

Transocean is going to be an entity focusing its efforts on ultra-deepwater, harsh environment floaters. This suggests the oft-delayed scrapping of floaters can be seen as the asset impairments are recorded. The company is de-emphasizing typical spec jackups, whose market is highly overpriced.

Culver Stinson

Culver Stinson

Stinson is US Markets Daily’s Senior Producer for News & Public Affairs.