Update: Transocean Projects Higher Downtime In Monthly Fleet Update

| About: Transocean Ltd. (RIG)

Summary

Transocean expects higher out-of-service days in 2014 and 2015.

Trend disappointing, but not unexpected.

Confirming long -term belief in upside potential of Transocean; short-term negative.

On July 16, Transocean (NYSE:RIG) released its monthly fleet update. Projected 2014 and 2015 downtime increased by 141 days and 11 days, respectively. The high-specification deepwater floater M.G. Hulme Jr. was noted as idle since July 9. Last month, the high-specification deepwater jackup GST Magellan (previously projected at 28 days out of service) was noted as being held for sale and was not included in downtime figures.

Planned Out-of-Service Days (Change)

January

February

March

April

May

June

July

2014

2

150

n/a

105

485

-5

141

2015

n/a

n/a

n/a

n/a

-84

29

11

Click to enlarge

Source: Transocean; 2015 out-of-service projection was 1,306 in April and 1,262 in July

RIG's fleet status report was not unexpected. However, it would certainly have been a positive development to see positive progress with respect to new contracts.

Last month, I shared my thesis that RIG and the other underwater drillers would benefit from geo-political shifts as producers diversify production sources, as 1) the Middle East has become demonstrably more volatile and 2) Russia has become a less desirable partner. My projections assumed a six-to-twelve month time horizon, so July activity, while disappointing, does not change my overall positive long-term outlook for RIG and the other drillers. From a very short-term perspective, I view the news as somewhat negative.

All investors should make their own decisions and conduct their own due diligence prior to making any decisions.

Disclosure: The author is long RIG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.