Offshore drilling giant, Transocean Ltd. (RIG - Analyst Report) recently issued a Fleet Update Summary for the period commencing Apr 18, 2013 to date. The value of all the new deals and extensions in the same time frame is estimated to be roughly $662 million. The update covers the company's offshore drilling rig status and contract information.
Per the report, Deepwater Millennium, a Dynamic Positioning drillship, got a contract to work offshore Australia for two years. The dayrate is expected to be around $605,000. Previously, the rig was operating at a dayrate of $545,000. Transocean added that the contract is expected to add $442 million to the existing backlog.
Moreover, Transocean John Shaw, a semi-submersible rig, got a contract extension offer to work for a year in the North Sea's U.K. sector. The unit will operate at a dayrate of $415,000. The contract is estimated to add $151 million to the backlog of Transocean. Previously, the rig was operating at a dayrate of $360,000.
Included in the report, Jack Bates, a semi-submersible rig, got a contract for operating three wells, situated offshore Australia. The unit is expected to work at a dayrate of $525,000. The deal will add $47 million to the company’s backlog. Management added that the rig was earlier working at a dayrate of $380,000.
The report also revealed that Falcon 100 – Transocean’s midwater floater – is out of contract presently. Further, as per the Fleet Update Summary, the out-of-service time expected for 2013 increased by 117 days.
Switzerland-based Transocean is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With less oil being discovered on land and with companies having to dig 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.
On the flip side, dayrates on rigs are likely to come under pressure as global capacity is freed up due to concerns over the Gulf of Mexico (GoM) drilling uncertainties. We believe Transocean will continue to face challenges in renewing and obtaining contracts on favorable terms.
Transocean currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
In the energy sector, three firms that are expected to significantly outperform the broader U.S. equity market over the next one to three months are CNOOC Ltd. (CEO - Analyst Report), InterOil Corporation (IOC - Snapshot Report) and Ultrapar Holdings Inc. (UGP - Snapshot Report). All the firms sport a Zacks Rank #1 (Strong Buy).