In the March fleet update report, Transocean Ltd. (RIG) announced the completed sale of its shallow-water rig, Transocean Mercury. The company did not divulge the financial terms and other details of the deal. This sale comes close on the heels of the disposal of the high-specification jackup Trident 20 in February 2010.
Constructed in the Scottish shipyard Upper Clyde Shipbuilders in 1969, the Mercury rig had the capacity to drill at a total depth of 20,000 feet while operating in up to 250 feet of water. The rig was employed in the MidEast––Red Sea region off the Egyptian coast but had been cold stacked since January 2010.
On the other hand, Switzerland-based Transocean has two high-specification jackup rigs under construction (Keppel FELS Super B Class Jackup TBN1 and Keppel FELS Super B Class Jackup TBN2). This is in accordance with the five-year drilling contractsthat Transocean entered with Chevron Corporation (CVX), last month. The rigs, with capital costs of approximately $400 million, are slated to commence operations in Thailand during the third quarter of 2013.
Leading offshore drilling contractor and the provider of drilling management services globally, Transocean’s contract drilling fleet comprises 47 high-specification deepwater floaters, 25 midwater floaters, 9 high-specification jackups, 54 standard jackups and other assets utilized to support offshore drilling activities worldwide, as of March 16, 2011.
We believe that given a technologically-advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power, Transocean offers strong earnings and cash flow visibility. However, the aftereffects of the Deepwater Horizon drill rig disaster continue to loom over the company’s performance, compelling us to maintain a long-term Neutral rating on the stock.
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