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Transocean Stock Plunges 43% in a Year: Time to Hold or Sell?
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Key Takeaways
Transocean shares fell 43% in a year, underperforming the oil and gas drilling industry.
The firm posted a $938M Q2 loss, widened by costs and peer underperformance comparisons.
Debt of $5.89B, share dilution and weak contract activity weigh on near-term prospects.
In the past year, Transocean Ltd.’s (RIG - Free Report) shares have lost 43.4%, underperforming the Oil & Gas Drilling sub-industry’s decline of 39.4%. This decrease also outpaced the broader oil and energy sector's modest 1.9% decline. Peer comparison further highlights the weakness, where Precision Drilling Corporation (PDS - Free Report) and Patterson-UTI Energy, Inc. (PTEN - Free Report) fell 23% and 43%, respectively. But Helmerich & Payne, Inc. (HP - Free Report) underperformed with a significant fall of 49%.
Yearly Highs and Lows: A Snapshot
Image Source: Zacks Investment Research
When a stock loses nearly half its value in just 12 months, investors are left grappling with a critical question: Is this a temporary setback or a signal to exit? Transocean, a leading global provider of offshore contract drilling services for oil and gas companies and specializing in technically demanding deepwater and harsh environment drilling, now faces mounting scrutiny and tests investor confidence.
For shareholders, the dilemma is whether they should hold on to Transocean stock expecting a rebound or get out before more damage is done. Let us dig deeper into the company’s financial health, market dynamics and prospects to determine whether selling the stock is the most prudent move.
What Is Behind RIG’s Underperformance?
Continuing Trend of Net loss: For the year ended Dec. 31, 2024, Transocean reported a staggering net loss of $512 million and since then, the trend has continued, with it reporting a net loss of $938 million in the second quarter of 2025 compared with a $123 million loss in the prior-year quarter, also falling far behind the peer companies. Helmerich & Payne, in its fiscal third quarter, reported a net loss of $163 million. Patterson-UTI also reported a net loss of $49 million in the recent second-quarter results. Precision Drilling reported a net income of C$16 million. This widening loss underscores sustained operational and market challenges, which, if not addressed promptly, could further erode shareholder value. Persistent negative earnings also hinder the firm’s ability to reinvest in growth or strengthen its balance sheet, making the stock less attractive for long-term investors.
Share Dilution From Bond Conversions: In June, Transocean issued 59.4 million shares in connection with the exchange of $157 million in senior exchangeable bonds, with another $77 million still outstanding. While intended to manage debt, such equity issuances dilute existing shareholders and may continue if management chooses to equitize remaining obligations rather than redeeming them in cash.
Rising Operating and Maintenance Expenses: Full-year 2025 operating and maintenance expense guidance has been revised upward to $2.375-$2.425 billion, due to higher reimbursables and foreign exchange impacts. Although some costs are offset by revenues, persistent cost inflation can erode profitability, particularly if revenue efficiency declines or day rates remain under pressure in the next few quarters.
Day Rate Softness and Utilization Dip: Despite a positive long-term outlook, the ultra-deepwater drillship market is experiencing a temporary slowdown. Leading-edge day rates have softened from the mid-to-high 400s level to the low 400s, with utilization dipping to the mid-80% range before an anticipated recovery. The company is avoiding long-term contracts at current rates to protect margins, yet this cautious approach risks leaving rigs underutilized if the recovery in contracting activity into 2026 is slower than projected.
Limited Near-Term Contracting Activity: Management admitted that the current market “white space” limits opportunities for locking in long-term contracts. They are avoiding aggressive bidding for multi-year deals due to unfavorable economics and high upgrade costs. While this discipline protects margins, it also means potential idle periods for rigs and slower revenue growth in the short term compared with peers who have secured multi-year Gulf of Mexico contracts recently.
High and Persistent Debt Burden: Despite efforts to reduce debt, Transocean still carries a substantial long-term debt load of $5.89 billion, alongside $666 million in current debt due within a year, again falling behind its peers. Helmerich & Payne, in its fiscal third quarter, reported a long-term debt of $2.2 billion, and Patterson-UTI and Precision Drilling in their second quarter results reported a long-term debt of $1.2 billion and C$5.5 billion, respectively. In a capital-intensive and cyclical industry, this high leverage restricts flexibility during market downturns and increases vulnerability to rising interest rates.
Market Volatility and Project Delays: The offshore drilling market remains sensitive to oil price swings, OPEC production decisions and geopolitical events. Operators have shown a willingness to defer noncritical investments by one or two quarters, creating uncertainty in project timing. These dynamic risks extend the current slowdown, reducing backlog visibility and delaying the anticipated tightening in rig utilization and day rates until well beyond late 2026.
Final Verdict for RIG Stock
The Zacks Rank #4 (Sell) company’s significant stock plunge reflects deep operational and financial strains, with widening losses, share dilution, rising expenses and a weak liquidity profile against heavy debt. While management’s restraint in securing unfavorable contracts protects margins, it limits near-term revenues and exposes the company to prolonged softness in day rates and utilization. Compared with peers, Transocean’s decline exceeded Precision Drilling and Patterson-UTI, though Helmerich & Payne fared worse.
What sets Transocean apart is the outsized debt burden and thin cash cushion, making it more vulnerable in a cyclical, capital-intensive industry. Despite its leadership in deepwater drilling and constructive long-term demand trends, RIG’s near-term outlook appears weaker than peers, leaving investors cautious about recovery prospects. Therefore, until the company demonstrates stronger financial performance and operational stability, it is advisable for investors to look elsewhere for opportunities in the oil and gas sector.
Image: Shutterstock
Transocean Stock Plunges 43% in a Year: Time to Hold or Sell?
Key Takeaways
In the past year, Transocean Ltd.’s (RIG - Free Report) shares have lost 43.4%, underperforming the Oil & Gas Drilling sub-industry’s decline of 39.4%. This decrease also outpaced the broader oil and energy sector's modest 1.9% decline. Peer comparison further highlights the weakness, where Precision Drilling Corporation (PDS - Free Report) and Patterson-UTI Energy, Inc. (PTEN - Free Report) fell 23% and 43%, respectively. But Helmerich & Payne, Inc. (HP - Free Report) underperformed with a significant fall of 49%.
Yearly Highs and Lows: A Snapshot
Image Source: Zacks Investment Research
When a stock loses nearly half its value in just 12 months, investors are left grappling with a critical question: Is this a temporary setback or a signal to exit? Transocean, a leading global provider of offshore contract drilling services for oil and gas companies and specializing in technically demanding deepwater and harsh environment drilling, now faces mounting scrutiny and tests investor confidence.
For shareholders, the dilemma is whether they should hold on to Transocean stock expecting a rebound or get out before more damage is done. Let us dig deeper into the company’s financial health, market dynamics and prospects to determine whether selling the stock is the most prudent move.
What Is Behind RIG’s Underperformance?
Continuing Trend of Net loss: For the year ended Dec. 31, 2024, Transocean reported a staggering net loss of $512 million and since then, the trend has continued, with it reporting a net loss of $938 million in the second quarter of 2025 compared with a $123 million loss in the prior-year quarter, also falling far behind the peer companies. Helmerich & Payne, in its fiscal third quarter, reported a net loss of $163 million. Patterson-UTI also reported a net loss of $49 million in the recent second-quarter results. Precision Drilling reported a net income of C$16 million. This widening loss underscores sustained operational and market challenges, which, if not addressed promptly, could further erode shareholder value. Persistent negative earnings also hinder the firm’s ability to reinvest in growth or strengthen its balance sheet, making the stock less attractive for long-term investors.
Share Dilution From Bond Conversions: In June, Transocean issued 59.4 million shares in connection with the exchange of $157 million in senior exchangeable bonds, with another $77 million still outstanding. While intended to manage debt, such equity issuances dilute existing shareholders and may continue if management chooses to equitize remaining obligations rather than redeeming them in cash.
Rising Operating and Maintenance Expenses: Full-year 2025 operating and maintenance expense guidance has been revised upward to $2.375-$2.425 billion, due to higher reimbursables and foreign exchange impacts. Although some costs are offset by revenues, persistent cost inflation can erode profitability, particularly if revenue efficiency declines or day rates remain under pressure in the next few quarters.
Day Rate Softness and Utilization Dip: Despite a positive long-term outlook, the ultra-deepwater drillship market is experiencing a temporary slowdown. Leading-edge day rates have softened from the mid-to-high 400s level to the low 400s, with utilization dipping to the mid-80% range before an anticipated recovery. The company is avoiding long-term contracts at current rates to protect margins, yet this cautious approach risks leaving rigs underutilized if the recovery in contracting activity into 2026 is slower than projected.
Limited Near-Term Contracting Activity: Management admitted that the current market “white space” limits opportunities for locking in long-term contracts. They are avoiding aggressive bidding for multi-year deals due to unfavorable economics and high upgrade costs. While this discipline protects margins, it also means potential idle periods for rigs and slower revenue growth in the short term compared with peers who have secured multi-year Gulf of Mexico contracts recently.
High and Persistent Debt Burden: Despite efforts to reduce debt, Transocean still carries a substantial long-term debt load of $5.89 billion, alongside $666 million in current debt due within a year, again falling behind its peers. Helmerich & Payne, in its fiscal third quarter, reported a long-term debt of $2.2 billion, and Patterson-UTI and Precision Drilling in their second quarter results reported a long-term debt of $1.2 billion and C$5.5 billion, respectively. In a capital-intensive and cyclical industry, this high leverage restricts flexibility during market downturns and increases vulnerability to rising interest rates.
Market Volatility and Project Delays: The offshore drilling market remains sensitive to oil price swings, OPEC production decisions and geopolitical events. Operators have shown a willingness to defer noncritical investments by one or two quarters, creating uncertainty in project timing. These dynamic risks extend the current slowdown, reducing backlog visibility and delaying the anticipated tightening in rig utilization and day rates until well beyond late 2026.
Final Verdict for RIG Stock
The Zacks Rank #4 (Sell) company’s significant stock plunge reflects deep operational and financial strains, with widening losses, share dilution, rising expenses and a weak liquidity profile against heavy debt. While management’s restraint in securing unfavorable contracts protects margins, it limits near-term revenues and exposes the company to prolonged softness in day rates and utilization. Compared with peers, Transocean’s decline exceeded Precision Drilling and Patterson-UTI, though Helmerich & Payne fared worse.
What sets Transocean apart is the outsized debt burden and thin cash cushion, making it more vulnerable in a cyclical, capital-intensive industry. Despite its leadership in deepwater drilling and constructive long-term demand trends, RIG’s near-term outlook appears weaker than peers, leaving investors cautious about recovery prospects. Therefore, until the company demonstrates stronger financial performance and operational stability, it is advisable for investors to look elsewhere for opportunities in the oil and gas sector.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.