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Transocean to Fund Rig Acquisition With $600M Note Offering

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Transocean Ltd. (RIG - Free Report) announced the start of offering senior notes to potential investors. The notes, with aggregate pricing amount of $600 million, will carry an interest rate of 6.125% and are expected to mature by 2025.

The company will conclude the note offering by Jul 20. It is to be noted that the notes could be called after Aug 1, 2021. The lien on the Deepwater Pontus will primarily give security to the senior notes and Transocean agreed to be the guarantor. 

Subtracting the costs of offering and discount for the initial buyers, the company will likely get net proceeds of roughly $586 million. Transocean intends to utilize the proceeds for partly funding the purchase or manufacturing Deepwater Pontus.

Based in Steinhausen, Switzerland, Transocean is among the leading contract drillers for oil and gas wells, located off the coast. There has been high demand for the company’s technologically advanced rigs that are capable of operating in the harshest of environments. As compared to other drillers, the company has four times more backlog — around $12 billion. This will likely provide Transocean with significantly more cashflow than other players.

The company’s pricing chart looks impressive. Over the past year, the stock has rallied 74%, outperforming the 24.9% collective gain of the stocks belonging to the industry.

Presently, the stock carries a Zacks Rank #3 (Hold). Meanwhile, better-ranked players in the energy space are Continental Resources, Inc. (CLR - Free Report) , Murphy Oil Corporation (MUR - Free Report) and Marathon Oil Corporation (MRO - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Continental beat the Zacks Consensus Estimate for earnings in all the prior three quarters, the average positive surprise being 80.5%.

Murphy Oil surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters.

We expect Marathon Oil to witness year-over-year earnings growth of 336.8% in 2018.

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