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Transocean (RIG) to Scrap 2 More Rigs, Record Charge in Q1 - Analyst Blog

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Offshore drilling giant, Transocean Ltd.RIG announced that it has added two more rigs to its scrap list. The company plans to scrap the rigs GSF Aleutian Key and Sedco 707, which were previously classified as held for sale.

The company anticipates a non-cash charge of about $90-$110 million in the first quarter as it plans to scrap the rigs. This brings Transocean's total scrap list to 18. In its latest fleet update, which was published last month, the company announced plans to scrap four rigs. (Read: Transocean Fleet Update: To Scrap 4 Rigs, Book Charge in Q1 )

Transocean added that it continues to evaluate its fleet - finding other rigs that need to be disposed - for long-term competitiveness.

Switzerland-based Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services. The company has a robust fleet comprising of high-specification floaters (semi-submersibles and drillships), midwater floaters and jackup rigs.

Transocean offers unmatched levels of earnings and cash flow visibility, given its technologically advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power.

However, the ongoing slump in oil and gas prices have curtailed deepwater drilling and weakened equipment demand, adversely affecting bookings at Transocean. A continued increase in the number of idled rigs suggests more troubles ahead. (Read: Offshore Drilling: Latest Fleet Analysis Suggest More Pain )

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

Better-ranked players from the energy sector include Valero Energy Corporation VLO , Western Refining, Inc. WNR and Ferrellgas Partners LP FGP . 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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