How Will Transocean Weather The Lull In The Offshore Rig Market?

Transocean (NYSE:RIG) has been cutting its rig count to improve utilization since 2016 in keeping with the slowdown in the general environment for offshore drilling operations. We expect consolidation and improved efficiency to be the two biggest themes in 2020 for offshore drilling companies. Trefis highlights trends in Transocean’s Revenues over recent years along with our forecast for 2019 and 2020 in an interactive dashboard, parts of which are summarized below.

Transocean is an offshore rig and drilling company based out of Switzerland. It operates in 20 countries and employs 9,000 personnel.

What’s Responsible For The Slowdown In The Offshore Drilling Industry?

  • Low oil prices and fewer offshore oil deposits either being found or developed has led to a reduction in demand for offshore drilling services.
  • Transocean relies on Royal Dutch Shell and Chevron for a large part of its revenue. Both these companies have been slowing down their offshore investments.
  • Key sources of revenue such as Guyana have also become an issue in recent times. Guyana was one of the world’s largest sources of offshore oil and gas. But in recent times, the site is no longer a hotspot, with recovery of crude becoming scarce.

What does the future hold for Transocean?

  • Transocean is increasingly relying on smaller and smaller contracts. These contracts largely come from the African continent, where there has been increased activity in offshore drilling.
  • Transocean recently added contracts from Equatorial Guinea to the tune of $100 million. This should help improve revenue in 2019-2020. The contract should also help improve Transocean’s average day rate slightly, which had been falling.
  • Africa remains key for the company, with a lack of demand and new drilling sites being an issue in traditional markets.
  • As of now, Transocean has no new contracts lined up for 2020.
  • With many of the current rigs ‘cold-stacked’, we see little signs of recovery in the near term.
  • The company will continue to focus on improved utilization and lowering rig costs until the market is improves. This should help its bottom-line.

Additional details about how Transocean’s rig count, day rate and utilization have trended over recent years is available in our interactive dashboard.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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