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Transocean Fleet Update: To Scrap 4 Rigs, Book Charge in Q1 - Analyst Blog

Offshore drilling giant, Transocean Ltd.RIG has provided a monthly fleet status report for the period from Feb 17, 2015. The value of all the new deals and extensions in contracts, during the aforesaid time frame, is estimated at roughly $9 million. The update covers the company's offshore drilling rig status and contract information.

Transocean disclosed that the expected out-of-service time for 2015 has been lowered by 102 days, primarily due to the semisubmersible Henry Goodrich, which is currently idle.

Per the report, Sedco Express - a fifth generation semisubmersible rig - has received a one-well contract extension, under which it will work in offshore Nigeria. Sedco Express is expected to work at a dayrate of $300,000. The award has added $9 million to the company's existing project backlog.

The company added that it has stacked the previously idle ultra-deepwater floaters Discoverer Spirit, GSF Jack Ryan, Deepwater Discovery, and Deepwater Pathfinder. Transocean also announced its plans to scrap the rigs Deepwater Expedition, Transocean Legend, Transocean Rather, and GSF Arctic III. The company intends to scrap a total of 16 floaters - including the above-mentioned rigs.

Transocean expects a non-cash charge of about $300-$325 million in its first quarter result as it plans to scrap the rigs.

Although the reduction in fleet may seem like bad news for the company, one should consider the fact that scrapping and stacking rigs mean lower operating costs for the firm. In the current turbulent times cost containment plays an important role and the move should give the company the much needed cash flow.

Currently, Transocean carries a Zacks Rank #3 (Hold).

Better-ranked players from the energy sector include Ferrellgas Partners LP FGP , Alon USA Partners, LP ALDW and Valero Energy Partners LP VLP . All these stocks sport a Zacks Rank #1 (Strong Buy).

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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.


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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