A month has gone by since the last earnings report for Transocean (
RIG Quick Quote RIG - Free Report) . Shares have lost about 1.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Transocean due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Transocean Posts Wider Loss, Revenue Miss in Q4
Transocean reported an adjusted net loss of 49 cents per share in the fourth quarter of 2022. The figure was wider than the Zacks Consensus Estimate of a loss of 19 cents per share. This underperformance can be attributed to a decline in revenues from contract drilling.
Moreover, RIG’s bottom line declined from the year-ago period’s loss of 19 cents. The offshore drilling powerhouse’s total adjusted revenues of $625 million missed the Zacks Consensus Estimate of $629 million. However, adjusted revenues rose 1.7% from the year-ago figure of $615 million. This outperformance was primarily driven by higher operational days, higher recharge revenues, and strong bonus revenues. Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed to 71.7% of the total contract drilling revenues. Harsh Environment floaters accounted for the remaining 28.3%.
In the fourth quarter of 2022, revenues from the Ultra-deepwater and Harsh Environment floaters totaled $434 million and $172 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $432 million and $189 million. Revenue efficiency for the reported quarter was 98%, higher than the year-ago value of 94.5% and the 95% reported sequentially. Dayrates, Utilization & Backlog
As of February 2023, the contract backlog for Transocean is $8.5 billion.
Average day rates in the quarter were $348,600, down from the year-ago level of $352,500. RIG’s average revenues per day from Harsh Environment floaters went from $387,700 to $357,900, indicating a a year-over-year decline. However, average revenues per day from Ultra-deepwater floaters increased to $344,800 from $337,100 in the year-ago quarter. Total fleet average rig utilization was 49.4% in the quarter, down from the prior-year period’s figure of 53.4%. Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $423 million from $430 million in the year-ago period.
In the fourth quarter of 2022, Transocean’s capital expenditures were $409 million, significantly higher than the year-ago period’s $87 million. Cash provided by operating activities was $448 million at the end of 2022. The company had cash and cash equivalents worth $683 million as of Dec 31, 2022. The long-term debt was $6.62 billion, with a debt-to-capitalization of around 38% as of Dec 31, 2022. Guidance
For 2023, Transocean expects revenues in the $2.9-$3 billion range based on 96.5% revenue efficiency.
The company anticipates a capital expenditure (Capex) of $275 million and a maintenance Capex of $100 million. Transocean anticipates $635 million in adjusted contract drilling revenues in the first quarter of 2023 and a nearly 15% increase in the number of offshore wells drilled in 2023. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -131.37% due to these changes.
At this time, Transocean has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.