RIG’s New Deepwater Contract

The world’s largest offshore driller, Transocean Ltd. (RIG), bagged a 455-day contract for its ultra-deepwater semisubmersible rig Sedco Express from a subsidiary of Noble Energy Inc. (NBL). The contract is expected to commence in the third quarter of 2010 after the expiry of Sedco’s current contract as well as completion of maintenance work and mobilization. Transocean is expecting approximately $241 million revenue from this contract.
 
A couple of weeks ago, Transocean's ultra-deepwater drillship Discoverer Clear Leader started its operations in the U.S. Gulf of Mexico under a five-year contract with Chevron Corp. (CVX). Clear Leader features Transocean’s patented dual-activity drilling technology designed to enable parallel drilling operations from a single derrick that saves time as well as money in deepwater well construction in comparison to conventional rigs.
 
We believe that the long-term fundamentals of the deepwater market continue to remain strong. With a number of speculative newbuild projects (projects sponsored by speculators and not drilling contractors) expected to be cancelled due to the current credit market issues, the long-term supply picture has become even more attractive. Transocean’s successful execution of long-term deepwater contract draws our attention towards the continued resilience of the deepwater drilling market. As such, our recommendation for Transocean is Outperform.

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