Transocean Provides Fleet Update

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

Per the report, the company’s midwater floater Sedco 714 received an 18-month contract extension at a dayrate of $435,000, higher than the previous dayrate of $398,000. In August last year, this midwater floater got one-year contract extension from oil and gas major Total SA ( TOT - Analyst Report ) .

Transocean also got third party certification of well control equipment on most of its active floaters (41 out of 64). It includes 24 out of 27 ultra-deepwater rigs.

However, jackup Trident 17, which was earlier put up for sale on the block, was sold and will no longer be a part of the company’s fleet.

Since the last update on December 17, Transocean added around $235 million in new contract and extensions.

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

However, the introduction of new and more stringent regulations due to the oil spill will likely make deepwater drilling activity prohibitively expensive for exploration and production companies, making many projects marginal. This could reduce the demand for deepwater drilling.

We are maintaining our long-term Neutral recommendation on the stock. Transocean currently retains a Zacks Rank #3 (Hold).