Offshore drilling giant Transocean Ltd. (RIG) recently issued a ‘Fleet Update Summary’ for the month of January. The update covers the company’s drilling rig status and contract information.
Per the report, the company’s midwater floater – Sedco 712 – received a 3-year contract to work in the U.K. sector of the North Sea. The dayrate for the work has been fixed at $380,000.
For another midwater floater – Sedneth 701 – a 1-year unpriced option was exercised by a customer to operate in Nigeria. The dayrate for the same is $311,000.
Since the last update on Jan 17, Transocean added around $530 million in new contracts and extensions.
Transocean is the leading offshore drilling contractor and provider of drilling management services worldwide. Its current contract drilling fleet comprises 82 mobile offshore drilling facilities, which again include 48 high-specification deepwater floaters, 25 mid-water floaters and 9 high-specification jackups.
Transocean currently has 6 ultra deepwater drillships and 3 high-specification jackups under construction.
The companies’ shares currently retain a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
With less oil being discovered on land and with companies having to dig even deeper to get to their reserves, Transocean is poised to benefit from a market with robust multi-year demand trends, given its technologically advanced and versatile drilling fleet.
In particular, Transocean is the industry leader in deep sea drilling. The company’s state-of-the-art mobile offshore drilling fleets worldwide can function in most challenging environments, such as the North Sea.
However, the introduction of new and more stringent regulations due to the oil spill will likely make deepwater drilling activity prohibitively expensive for exploration and production companies, making many projects marginal. This could reduce the demand for deepwater drilling.
But there are certain other energy firms like Atlas Energy L.P. (ATLS), Cabot Oil & Gas Corporation (COG) and Memorial Production Partners L.P. (MEMP) that are expected to significantly outperform the equity market in the next 1 to 3 months. All the 3 stocks currently hold a Zacks Rank #1 (Strong Buy).
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