Transocean Sees Energy Market Recovery Uncertain
Rough Waters for Transocean after 4Q15 Results?
Transocean’s segment-wise performance
From 4Q14 to 4Q15, all of Transocean’s (RIG) segments saw lower revenues. Its Deepwater Floaters segment suffered the highest revenue decline, with a 54% fall. The company’s Ultra Deepwater Floaters segment was the most resilient, with an 18% fall, and this segment accounted for 56% of RIG’s total 4Q15 revenues.
By comparison, Forum Energy Technologies (FET), Transocean’s peer, turned a $164 million net loss in 4Q15, compared to $46 million in net income in 4Q14. FET’s market capitalization stands at $899 million compared to RIG’s $2.98 billion.
Analyzing Transocean’s growth drivers
The following are some key factors driving RIG’s growth:
lower average daily revenues in Transocean’s deepwater floaters and ultra-deepwater floaters segments
severely lower fleet utilization in harsh environment floaters
lower jack-up fleet utilization
But the following served to partially offset these negative factors:
significantly higher average daily revenues in Transocean’s harsh environment floaters and mid-water floaters segments
strong capex in 4Q15 compared to one year ago
RIG’s total backlog stood at $15.5 billion on February 11, 2016, down 31% compared to one year previously. Transocean represents 0.24% of the Energy Select Sector SPDR ETF (XLE). For investors looking for exposure to the energy equipment and services industry, this subsector makes up 18.6% of XLE.
Transocean’s CEO weighs in
Transocean’s Chief Executive Officer, Jeremy Thigpen, pointed to energy market recovery uncertainty. In the company’s 4Q15 press release, Thigpen commented that “while predicting the timing of an industry recovery is nearly impossible, we take comfort in knowing that our strong liquidity, combined with our market-leading backlog, will sustain us through this downturn.
Thigpen added that the company “will continue to take the necessary steps to keep our employees safe, to drive performance improvements for our customers, to further streamline our business, and to enhance our financial position and returns.”
Keep reading for a crucial discussion of Transocean’s returns.
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