Transocean Limited RIG recently issued a new fleet status report, lending an insight into its portfolio of drillships, recent contracts and backlog.
Since its last fleet status update in October 2019, which showed a backlog of $10.8 billion, the company has been successful in securing $352.9 million worth additional contracts, courtesy of new deals and extensions of its existing projects.
Following the fall in oil prices during mid-2014, the offshore drilling market had been hit hard as operators ramp down offshore exploration and development activity. Now, with crude price being back above $60 per barrel, the offshore rig market is witnessing an upswing.
Cashing in on this optimism, Switzerland-based Transocean has been able to snap up a number of contracts for its ultra-deepwater and harsh environment drilling services of late. Apart from contributing to the company’s top line, this upside will considerably improve dayrates and provide material benefit to the company’s cash flows.
Transocean Ltd. Price
Transocean Ltd. price | Transocean Ltd. Quote
Digging Into Details of the Newly-Clinched Contracts
While the company won a few deals since the last fleet report in October 2019, the$91- million worth one-year drilling contract off the coast of Trinidad and Tobago for its semisubmersible Development Driller III served as the fundamental component to boost its backlog. This new pact with leverage to command an estimated day rate of $250,000 is scheduled to start in the second quarter of 2020. Further, it is expected to help the company progress in terms of both backlog and cash flow.
Moving on, the Leiv Eiriksson rig, which operates for ConocoPhillips COP, gained a 125-day contract offshore Norway and is expected to be effective August 2020. Drillship Discoverer Inspiration, working for Talos Energy TALO, also clinched a 120-day contract in the US Gulf of Mexico with a dayrate of $210,000. Notably, Discoverer Inspiration is set to conclude a contract with Chevron Corporation CVX in the US Gulf during the first quarter of this year.
Further, the company was awarded new agreements for its drillships including Dhirubhai Deepwater KG2 and Deepwater Asgard.
The slew of contracts to the company’s credit reflects steady demand from customers, underscoring its earnings and cash flow visibility. Markedly, Transocean, sitting atop a record backlog, is the largest provider of offshore contract drilling services.
With U.S. offshore industry witnessing early signs of revival, evidenced by the spurt in project sanctions, the Zacks Rank #2 (Buy) Transocean is poised to capitalize on this trend effectively, riding on its technologically-advanced and versatile drilling fleet.
With numerous offshore projects expected to be green-lighted in 2020, demand for rigs is likely to be spurred benefiting this offshore drilling giant. The company has been taking necessary steps to enhance its fleet with modern and competitive rigs while scrapping the old and incompetent drillships to make its operations more technically sound. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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