In the April fleet update report, Transocean Ltd. (RIG) announced that it has stacked one deepwater rig, Transocean Richardson and two midwater floaters, Sedco 601 and J.W. McLean, due to drop in demand. The company has also put two shallow-water rigs, GSF Britannia and GSF Labrador, up for sale.
The deepwater Transocean Richardson operated off the coast of Angola at $340,000 per day for Chevron Corp (CVX). The two midwater rigs earned more than $250,000 per day, with Sedco 601 working in offshore Malaysia and J.W. McLean in the North Sea for Marathon Oil Corporation (MRO).
Leading offshore drilling contractor and provider of drilling management services globally, Transocean’s contract drilling fleet comprised 47 high-specification deepwater floaters, 25 midwater floaters, 9 high-specification jackups, 52 standard jackups and other assets utilized to support offshore drilling activities worldwide, as of April 14, 2011.
We believe that Transocean exhibits a technologically advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power. The company’s recent contract signings for its two newest high-specification jackups with Chevron for five-year periods will act as major growth drivers in the coming years.
However, the aftereffects of the Deepwater Horizon drill rig disaster continue to loom over the company’s performance. We also believe that Transocean will continue to face challenges in renewing/obtaining contracts on favorable terms. Additionally, the company is exposed to risks associated with operating in international markets.
We are also maintaining our long-term Neutral recommendation on the stock. Transocean currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
CHEVRON CORP (CVX): Free Stock Analysis Report
MARATHON OIL CP (MRO): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
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