Transocean Can Be a Big Bet

The improvement in the deepwater floater backlog and midwater floater backlog of Transocean (RIG) is having a positive impact on the fleet average revenue efficiency.

Thus, the improvements in the contract backlog of Transocean signify a positive sign for its investors that should allow the company to put a better financial performance going forward. The company has a total backlog of $14.55 billion as of April 21, 2016.

The most significant thing to observe here is that with the increase in the Newbuild DryShips and gaining contracts for the Newbuild, Transocean revenue efficiencies should improve going forward.
Its revenue efficiencies have picked up due to rises in the Deepwater and Midwater Floaters.

The deepwater floaters’ revenue capabilities have increased to 98% in March from 95% at the end of December 2015. Meanwhile, the Midwater floaters saw its revenue efficiency increasing to 98% in March 2016 as compared to revenue efficiencies of 91% last year. This increase in the revenue efficiencies is a positive sign for the company that should improve its financial performance going forward.

Improving fleet rate should be a tailwind

Over the past couple of years, the rig utilization rate has fallen considerably, due to falling oil and gas prices. However, Transocean believes that the oversupply of oil will decrease due to narrowing imbalance of the current supply and demand. This imbalance should create upward pressure on the commodity pricing, with a consequent increase in demand for the drilling rigs. Thus, the company estimates its uncommitted fleet rate to improve in the coming four years.The gradual improvement in the fleet rate will enhance its backlog value that should have a positive impact on its top line going forward.


Thus, Transocean with these improvements in the operating costs, G&A expenses, and contract backlog looks like a good bet during this not so inspiring price environment. Moreover, the company is gaining contracts for its newbuild that should improve its fleet utilization and increase revenue efficiency additionally. So, all-in-all, the company is making progress in all the departments of its business, which is a good sign for its investors.
Published on May 19, 2016
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

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