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Fleet Update Report for Transocean

Zacks Equity Research

Offshore drilling giant Transocean Ltd. (RIG) recently issued a fleet status report for the period commencing Feb 18, 2014 to date. The value of all the new deals and contract extensions in the same time frame is estimated at roughly $14.0 million.

The update covers the company's offshore drilling rig status and contract information. The expected out-of-service time for 2014 is up by 2 days.

Per the report, GSF Galaxy III, an independent leg cantilever jackup, has got contract extension offer for a period of two and a half months. The jackup will be working at the U.K. sector of the North Sea. The rig will likely operate at a dayrate of $180,000, lower than the previous dayrate of $226,000. The extended deal will add roughly $14.0 million to the backlog.

Transocean added that GSF Development Driller I, an ultra-deepwater floater, is now out of contract.

Switzerland-based Transocean is the world’s largest offshore drilling contractor and a leading provider of drilling management services. With its technologically-advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power, the company offers an unmatched level of earnings and cash flow visibility. However, we remain concerned about the offshore driller’s high debt level and operational issues such as fluctuating dayrates and costs.

Transocean currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the oil and gas drilling industry like Helmerich & Payne Inc. (HP), Patterson-UTI Energy Inc. (PTEN) and Precision Drilling Corp. (PDS). All these stocks sport a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on PDS

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