What’s The Outlook For Transocean?
Transocean (NYSE:RIG), the world’s largest offshore drilling company, is likely to witness a relatively mixed 2018, amid continued weakness in the offshore space. While crude oil prices have witnessed a rebound over the last several months, leading to modestly higher offshore drilling activity, the oversupply of rigs in the market could keep the extent of the recovery in check for drilling contractors. Below, we take a look at the near-term outlook for Transocean and its expected performance over 2018. We have also created an interactive dashboard analysis which you can use to arrive at your own revenue and EPS estimates for Transocean.
Transocean has been focusing on rationalizing its fleet over the last few years. Over the past year, the company divested its jack-up fleet and retired nine other rigs, allowing it to become a pure-play floater company. The acquisition of Songa Offshore helped the company add seven semi-submersibles to its fleet. The company had 47 rigs in its fleet as of February, down from an average of 49 rigs last year.
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- What’s The Outlook Like For Transocean In 2019?
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Transocean’s contract backlog grew to $12.8 billion as of February 2018, marking its first increase in almost three years. This was largely due to the closure of the Songa Offshore deal and the accompanying new contracts. This contract backlog should give the company some revenue stability while enabling it to maintain market share. However, we expect its day rate improvements to be somewhat limited this year, despite the company’s focus on higher-value rigs, considering the oversupply of rigs in the deepwater and broader offshore market. While we expect utilization rates to see a modest improvement over 2018, it is likely that it will remain well below historical levels. Overall, we expect Transocean’s gross margins to also face pressure, due to the market conditions and the integration of Songa Offshore.
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