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Summary

  • Once again, RIG expects higher out-of-service days in 2014 and 2015.
  • Out-of-service trend expected; good news in higher day rates on two new contracts.
  • Confirming short-term hold.

On August 21, Transocean (NYSE:RIG) released its monthly fleet update. Projected 2014 and 2015 fleet downtime increased by 28 days and 236 days, respectively. The report confirmed that 24 of RIG's rigs are idle or have contracts expiring prior to the end of Q2 2015. In a bit of good news, the Company announced $78 million in new contracts, primarily for two fourth/fifth generation high specification deepwater floaters (Jack Bates and GSF Celtic Sea); both contracts reflected increased day rates over the previous contract. Two new ultra-deepwater drillships, the Deepwater Invictus and the Deepwater Asgard, commenced three year operations; the contracts and dayrates of $595,000 and $600,000 had been previously announced.

Planned Out-of-Service Days (Change)

Source: Transocean Fleet Reports (January-August, 2014)

RIG's fleet status report was about as expected. In an article written earlier this month, "Seadrill: Best Prospects Among The Drillers And A 'Buy'", RIG's large number of rigs needing contract renewals was identified. I was pleasantly surprised to see positive day rates on the new contracts for the older rigs (most recently upgraded in the late 1990's).

The report did not change my opinion on RIG, as articulated in my article, "Transocean: Short Term Risks And Below Peer Group Upside". I continue to believe the Company has promising long-term prospects but short-term challenges and that there are other players in the industry that offer more reward for less risk.

Source: Update: More Downtime For Transocean's Fleet