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Transocean Closes Ocean Rig Buyout, Boosts Fleet Strength

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Transocean Limited (RIG - Free Report) recently completed the acquisition of its smaller rival Ocean Rig UDW, Inc. In September, the offshore drilling giant inked a $2.7-billion deal to acquire Ocean Rig and received shareholders' nod for the buyout during November-end. The deal has been closed much ahead of the expected timeline of first-quarter 2019.

Benefits

Synergies: The strategic acquisition is expected to lead to significant commercial, financial and operational synergies, owing to the integration of assets, systems, as well as staff. The transaction aims to reduce costs through economies of scale and result in annual cost savings of $70 million. Per earlier announcement, Transocean has 79% stake in the combined entity and Ocean Rig holds the remaining 21%.

Growth Opportunities: Transocean has been streamlining its portfolio by exclusively focusing on deep-water floaters and tapping into lucrative growth opportunities. Furthermore, the acquisition cements Transocean’s position in the offshore drilling industry. The deal also expands the company’s presence in Brazil, Norway and West Africa, placing it much ahead of competitors in terms of the number of deep-water rigs.

Fleet Expansion: The acquisition gave Transocean 11 drillships along with two floating semi-submersible rigs. The company’s fleet now owns 52 offshore drilling units, comprising 32 ultra-deepwater, 14 harsh environment, two deepwater and four mid-water floaters. Moreover, four ultra-deepwater drillships are under construction. The company also has 33% stake in a harsh environment semisubmersible. This enormous fleet is expected to boost Transocean’s long-term opportunities and help the combined entity to penetrate into the deep-and harsh-water markets more effectively.

Price Performance                                                                                                                                                        

Steinhausen, Switzerland-based Transocean has lost 7.3% in the past year compared with 17.5% collective fall of the industry it belongs to.

 

 

Zacks Rank and Stocks to Consider

Currently, Transocean carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:

Houston, TX-based Enterprise Products Partners L.P. (EPD - Free Report) holds a Zacks Rank #1 (Strong Buy). The company’s earnings for 2018 are expected to surge more than 36% year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rome, Italy-based Eni S.p.A. (E - Free Report) has a Zacks Rank #1. Its earnings for 2018 are expected to grow more than 100% from the 2017 level. 

Tulsa, OK-based Helmerich & Payne, Inc. (HP - Free Report) carries a Zacks Rank #2 (Buy). The company’s sales for 2018 are expected to grow more than 20% from 2017.

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