Offshore drilling giant,
) has reduced its capital expenditure for the year 2013 to $2.4
billion from $3 billion previously. Management reveals that
changes in payment timings on under-construction rigs are the
main reasons behind the reduction.
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Transocean added that roughly $1.3 billion, representing greater
than half of the newly designed capital expenditure, will be
allocated to build new rigs. Moreover, Transocean has decided to
shell out approximately $400 million for the renovation and
upgradation of the existing rigs.
Transocean disclosed that six ultra-deepwater drillships and two
shallow-water jackups are currently under construction. The
jackups are expected to operate at a water depth of 350 feet and
can drill up to depths of 35,000 feet whereas the ultra-deepwater
rigs will be capable to work at a water depth of 12,000 feet and
can drill up to depths of 40,000 feet.
At the same, Transocean has reduced its fleet size to 83 as
compared to 136 rigs a few years ago, as it looks to assign
capital for high specification drilling rigs.
On May, 8, 2013, Transocean reported earnings per share
(excluding special items) to be 93 cents, which is ahead of the
year-ago adjusted profit of 75 cents, owing to better utilization
of rigs. However, the earnings per share failed to beat the Zacks
Consensus Estimate of $1.01 due to a significant increase in
Switzerland-based Transocean is the world's largest offshore
drilling contractor and the leading provider of drilling
management services worldwide. With less oil being discovered on
land and with companies having to dig ever 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.
On the flip side, 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.
Transocean currently carries 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.
In the energy sector, three firms that are expected to outperform
the broader U.S. equity market over the next one to three months
SM Energy Company
). All three firms sport a Zacks Rank #1 (Strong buy).