Transocean (RIG) Inks a $486M Contract for Deepwater Aquila
Transocean Ltd. RIG announced a three-year contract for its newbuild ultra-deepwater drillship, the Deepwater Aquila. This contract, secured in partnership with a national oil company for work offshore Brazil, is expected to commence in the third quarter of 2024. This deal is impressive because it represents approximately $486 million in firm backlog, excluding a mobilization fee of approximately 90 times the contract dayrate. In addition to this exciting contract news, Transocean is making strategic moves to further solidify its position in the industry.
The Deepwater Aquila: A Game-Changer in Offshore Drilling
The Deepwater Aquila is expected to be delivered from the shipyard in October 2023. Once delivered, it will be one of the most advanced drillships in the world, capable of operating in water of up to 12,000 feet deep.
The Deal’s Significance for Transocean
The contract is a positive sign for Transocean, as it indicates the rising demand for RIG’s high-end drillships. While the company has been struggling of late due to the downturn in the offshore drilling market, the new contract is suggestive of the recovering market.
Strategic Acquisition
In a strategic move to support its growing fleet, Transocean has also agreed to acquire the outstanding interests in Liquila Ventures Ltd. This company was specifically formed to facilitate the acquisition of the Deepwater Aquila and is currently co-owned by Transocean's joint venture partners, Perestroika and Lime Rock Partners.
A Critical Acquisition
The acquisition of Liquila Ventures is more than just a financial transaction. It's a strategic maneuver that strengthens Transocean's position in the industry. RIG is further enhancing its ability to meet the growing demand for deepwater drilling services by taking full ownership of the Deepwater Aquila. Following the acquisition, the company will own and operate eight of the world's 12 ultra-deepwater, 1,400 short-ton hookload drillships.
Future Financing
In an attempt to execute the drilling contract for Deepwater Aquila and complete the acquisition of Liquila Ventures, Transocean is actively exploring various debt financing alternatives. This strategic financial planning is aimed at partially funding the costs associated with acquiring the rig from the shipyard and preparing it for its forthcoming contract in Brazil.
Conclusion
Transocean's announcement of its three-year contract for the Deepwater Aquila is a testament to its unwavering commitment to excellence and innovation in the offshore drilling industry. With a contract value of approximately $486 million, a substantial mobilization fee and the strategic acquisition of Liquila Ventures, RIG is poised for sustainable growth and industry leadership.
Zacks Rank and Key Picks
Currently, RIG carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI and USA Compression Partners USAC, both sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at $3.49 billion. In the past year, its shares have risen 7.5%.
CVI currently pays a dividend of $2 per share, or 5.76% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is worth approximately $2.2 million. USAC currently pays a dividend of $2.10 per unit, or 9.39% on an annual basis.
The company offers natural gas compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil.
Archrock is valued at around $1.93 billion. It delivered an average earnings surprise of 15.08% for the last four quarters and its current dividend yield is 5.02%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
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