Shares of Transocean Ltd. (RIG - Free Report) have soared 52.8% since third-quarter 2020 earnings announcement on Nov 2. Alongside a better-than-expected bottom line, investors’ hopes are buoyed by the company’s encouraging guidance for 2021. In particular, the offshore driller anticipates its operations and maintenance expense for 2021 in the $1.4-$1.6 billion range, much lower than expected.
Transoceanreported adjusted net loss per share of 11 cents, narrower than the Zacks Consensus Estimate of a loss of 17 cents as well as the year-ago loss of 38 cents. This outperformance is led by the company’s improving utilization.
However, this offshore drilling powerhouse’s total revenues of $773 million missed the Zacks Consensus Estimate of $783 million and also the prior-year figure of $784 million, primarily on lower activity levels.
Segmental Revenue Break-Up
Transocean’s Ultra-deepwater floaters contributed to 63.4% of total contract drilling revenues while Harsh Environment floaters accounted for the remainder. In the quarter under review, revenues from Ultra-deepwater and Harsh Environment floaters totalled $490 million and $283 million each compared with the year-ago reported figures of $493 million and $281 million, respectively.
Revenue efficiency was 96.6%, lower than 97.2% reported sequentially. The figure also declined from the year-ago value of 97%.
Dayrates and Utilization
Average dayrate in the quarter rose to $343,500 from the year-ago level of $314,500. The company witnessed strong year-over-year average revenues per day from Harsh environment floaters. Overall, fleet utilization was 65% during the quarter, up from the prior-year utilization rate of 58%.
Backlog
Transocean’s backlog record at $8.2 billion as of October reflects a decline of $2.6 billion from the year-ago figure.
Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $470 million from $547 million a year ago. The company spent $65 million on capital investment in the third quarter. Cash provided by operating activities totalled $81 million. The company had cash and cash equivalents worth $1.38 billion on Sep 30, 2020. Long-term debt was $7.79 billion with debt-to-capitalization of 40.6% as of the same date, improving from the sequential quarter’s 43.6%.
Guidance
For the fourth quarter, the company expects adjusted contract drilling revenues to be $710 million with a revenue efficiency of 95%.
Fourth-quarter operating and maintenance expense is projected to be approximately $445 million. Further, the company projects its G&A expense for the current quarter to be approximately $42 million.
Meanwhile, capital spending for the fourth quarter comprising capitalized interest is predicted to be almost $55 million. Besides, the amount projects nearly $37 million for the newbuild drillships under construction and the remaining $18 million for maintenance.
For 2021, Nabors forecasts adjusted contract drilling revenues in the $2.6-$2.8 billion band. The company anticipates its operations and maintenance expense for 2021 in the $1.4-$1.6 billion range while its G&A expense is estimated between $150 million and $160 million.
Meanwhile, capital spending for 2021 comprising capitalized interest is expected to be $1.5 billion. The amount also assumes $1.4 billion for the newbuild drillships under construction and the remaining $100 billion for maintenance.
Zacks Rank & Key Picks
Transocean currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Oasis Petroleum Inc. , Antero Resources Corporation (AR - Free Report) and Matador Resources Company (MTDR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Shares of Transocean Ltd. (RIG - Free Report) have soared 52.8% since third-quarter 2020 earnings announcement on Nov 2. Alongside a better-than-expected bottom line, investors’ hopes are buoyed by the company’s encouraging guidance for 2021. In particular, the offshore driller anticipates its operations and maintenance expense for 2021 in the $1.4-$1.6 billion range, much lower than expected.
Transoceanreported adjusted net loss per share of 11 cents, narrower than the Zacks Consensus Estimate of a loss of 17 cents as well as the year-ago loss of 38 cents. This outperformance is led by the company’s improving utilization.
However, this offshore drilling powerhouse’s total revenues of $773 million missed the Zacks Consensus Estimate of $783 million and also the prior-year figure of $784 million, primarily on lower activity levels.
Segmental Revenue Break-Up
Transocean’s Ultra-deepwater floaters contributed to 63.4% of total contract drilling revenues while Harsh Environment floaters accounted for the remainder. In the quarter under review, revenues from Ultra-deepwater and Harsh Environment floaters totalled $490 million and $283 million each compared with the year-ago reported figures of $493 million and $281 million, respectively.
Revenue efficiency was 96.6%, lower than 97.2% reported sequentially. The figure also declined from the year-ago value of 97%.
Dayrates and Utilization
Average dayrate in the quarter rose to $343,500 from the year-ago level of $314,500. The company witnessed strong year-over-year average revenues per day from Harsh environment floaters. Overall, fleet utilization was 65% during the quarter, up from the prior-year utilization rate of 58%.
Backlog
Transocean’s backlog record at $8.2 billion as of October reflects a decline of $2.6 billion from the year-ago figure.
Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $470 million from $547 million a year ago. The company spent $65 million on capital investment in the third quarter. Cash provided by operating activities totalled $81 million. The company had cash and cash equivalents worth $1.38 billion on Sep 30, 2020. Long-term debt was $7.79 billion with debt-to-capitalization of 40.6% as of the same date, improving from the sequential quarter’s 43.6%.
Guidance
For the fourth quarter, the company expects adjusted contract drilling revenues to be $710 million with a revenue efficiency of 95%.
Fourth-quarter operating and maintenance expense is projected to be approximately $445 million. Further, the company projects its G&A expense for the current quarter to be approximately $42 million.
Meanwhile, capital spending for the fourth quarter comprising capitalized interest is predicted to be almost $55 million. Besides, the amount projects nearly $37 million for the newbuild drillships under construction and the remaining $18 million for maintenance.
For 2021, Nabors forecasts adjusted contract drilling revenues in the $2.6-$2.8 billion band. The company anticipates its operations and maintenance expense for 2021 in the $1.4-$1.6 billion range while its G&A expense is estimated between $150 million and $160 million.
Meanwhile, capital spending for 2021 comprising capitalized interest is expected to be $1.5 billion. The amount also assumes $1.4 billion for the newbuild drillships under construction and the remaining $100 billion for maintenance.
Zacks Rank & Key Picks
Transocean currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Oasis Petroleum Inc. , Antero Resources Corporation (AR - Free Report) and Matador Resources Company (MTDR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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