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Analyst Blog

Offshore drilling giant Transocean Ltd. (RIG - Analyst Report) recently issued a ‘Fleet Update Summary’ for the month of November. The update covers the company’s drilling rig status and contract information.

Per the report, the company’s high specification deepwater floater Discoverer Seven Seas won a three well contract from Inpex Corporation to work in Indonesia. The contract would be effective from May 2013 at a revised dayrate of $500,000 against a prior dayrate of $490,000.

For Transocean’s high specification jackup GSF Magellan, a six-month option was exercised by oil major Exxon Mobil Corporation (XOM - Analyst Report) to operate in Nigeria at a dayrate of $160,000. The jackup’s previous dayrate was $143,000.

The company also sold 37 standard jackups and one swamp barge to Shelf Drilling Holdings Ltd for $1.05 billion.

Transocean is the leading offshore drilling contractor and provider of drilling management services worldwide. Its current contract drilling fleet comprises 82 mobile offshore drilling facilities, which again include 48 high-specification deepwater floaters, 25 mid-water floaters and 9 high-specification jackups.

Transocean currently has six ultra deepwater drillships and three high-specification jackups under construction.

With less oil being discovered on land and with companies having to dig ever deeper to get to their reserves, Transocean is poised to benefit from a market with robust multi-year demand trends, given its technologically advanced and versatile drilling fleet.

Transocean’s state-of-the-art mobile offshore drilling fleet that can function in most challenging environments across the globe, Transocean is the industry leader in this field.

However, operational issues such as fluctuating dayrates and high costs along with the company’s high debt have kept us on the sidelines.

As such, we maintain our Neutral recommendation on Transocean shares.

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