Transocean - Complete Fleet Status As Of July 21, 2016, And Commentary

| About: Transocean Ltd. (RIG)

Summary

Transocean released its July FSR yesterday. The company announced a few new contracts.

Transocean, is fighting the trend, and has secured the few contracts that were available.

Transocean is a solid offshore driller that should be accumulated on any weakness with a few years time horizon.

The SemiSubmersible Jack Bates.

This article is an update to my preceding article on Transocean (NYSE:RIG), published on April 22, 2016, regarding the April fleet status.

Complete Fleet Status as of July 21, 2016.

To view the most recent fleet status, click here.

1. Rigs Under Construction.

# RIG K feet Delivery Contract End

Day Rate

K $

Location
Ultra-deepwater Drillships
1 Deepwater Pontus 12/40

Q1/18

Q4'17-Q4'27

519

[Shell]

TBA

2 Deepwater Poseidon 12/40

Q2/18

Q1'18-Q1'28

519

[Shell]

TBA

3 Deepwater Conqueror 12/40 Q4/16 Q4'16-Q4'21 599

[Chevron]

US GOM

4 JSPL Ultra-deep Espadon TBN 1 ("2") 12/40 1Q'20 Available - -
5

JSPL Ultra-deep Espadon TBN 2

("2")

12/40 3Q'20 Available - -
High-specification Jackups
1 Transocean Cepheus ("1") 400/35 1Q2018 Available -
2 Transocean Cassiopeia ("1") 400/35 3Q2018 Available -
3

Transocean

Centaurus ("1")

400/35 1Q2019 Available -
4 Transocean Cetus ("1") 400/35 3Q2019 Available -
5

Transocean

Circinus ("1")

400/35 1Q2020 Available -
Click to enlarge

("1") - The first of five newbuild high-specification jackups contracted to Keppel FELS Limited's shipyard in Singapore is expected to be delivered from the shipyard in the first quarter of 2018, and the remaining four jackups will be delivered at approximately six-month intervals thereafter.

On March 8, 2016, Transocean Ltd. announced the following:

Today a mutual agreement with Keppel Offshore & Marine Ltd`s shipyard, Keppel FELS, to defer the delivery and related payments of five high-specification jackups until 2020. The Super B 400 Bigfoot Class jackup drilling rigs are now scheduled to be delivered in two and three month intervals beginning in the first quarter of 2020.

("2") Please read my preceding article here.

2. High-Specification Floaters: Ultra-Deepwater

High-specification Floaters

Ultra-deepwater Rigs

7,500'/12,000'-30,000'/40,000'

Ship or Semi

Contract

End

Current

Day Rate

K $

Operator

Location

Day-off

1

Deepwater Proteus

2016

Ship

7/16

8/16 - 5/26

498

486

[Shell]

US GoM
2

Deepwater Thalassa

2015

Ship

7/16

7/16 - 2/26

499

488

[Shell]

US GoM
3

Deepwater Asgard

2014

Ship

6/17

(6/17-6/18 option)

615

(530)

[Chevron]

US GOM

4

Deepwater Invictus

2014

Ship

8/16

8/16-9/16

9/16-7/17

350+48+bonus?

(350 option)

592+48

[BHP Billiton]

Trinidad

US GOM

5

Discoverer Clear Leader

2009

Ship

Owned by Transocean Partners LLC 49%

10/18

581

[Chevron] US GOM

6

Discoverer Inspiration

2010

Ship

Owned by Transocean Partners LLC 49%

3/20

585

[Chevron] US GOM

7

Dhirubhai DW KG1

2009

Ship 12/17 410

[Petrobras] Brazil

(21d)1Q'16

8

Dhirubhai DW KG2

2010

Ship 11/16

(Not

Disclosed)

TBA

(5d)1Q'16 (7d)2Q'16

9

Discoverer India

2010

Ship

9/16

9/16-1/21

528

508

[Reliance] US GOM

[Reliance] India

10

Petrobras 10000

2009

Ship 8/19 429

[Petrobras] Brazil

11

Deepwater Nautilus

2000

SemiSub 8/17 472

[Shell]

US GOM

(2d)4Q'15

12

Discoverer Luanda

2010

Ship 1/18 487

[BP]

Angola

13

Development Driller III

2009

SemiSub

Owned by Transocean Partners LLC 49%

11/16 422

[BP]

US GOM

Click to enlarge

3. High-Specification Floaters: Deepwater

High-specification floaters: Deepwater (12)

4,500-7,200'/25,000'

Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1

Sedco 706

1976/1994/

2008

Semi

9/16

9/16-10/18

282

279

[Petrobras] Brazil

2

Jack Bates

1997

Semi 10/16 - 10/18 127

[ONGC]

India

(71d) 3Q'16

4

M.G Hulme Jr.

1996

Semi 8/16 163

[TBA]

TBA

(39d) 2Q'16

Click to enlarge

4. High-Specification Semi-Submersibles: Harsh Environment

High-specification floaters: Harsh environment (7)

1,500'-10,000'/25,000'-30,000'

Contract

End

Current

Day Rate

K $

Location
1

Transocean Leader

Location: North Sea

1997 - SemiSub

4 G

5/18

5/18-5/19

335

305

[Enquest] UKNS

2

Paul B. Loyd,JR

Location: North Sea1990 - SemiSub

4 G

9/16

9/16-3/17

3/17-6/17

(6/17-9/17 Option (446)

(9/17-3/18 Option (454)

(3/18-6/18 Option (460)

433

442

449

-

-

-

-

-

-

-

-

-

[BP]

UKNS

3

Transocean Arctic

Location: North Sea

1986 - SemiSub

7/16-9/16

9/16-11/16

11/16-7/17

N/D

179

-

179

[Faroe Petro]

[Engie]

[Det Norske]

Norway

4

Henry Goodrich

1985-2007/SemiSub

5/18

275 (~50K for mobilization)

[Husky Oil]

Canada

(37d) Q2'16

5

Transocean Spitsbergen

2010 - SemiSub

7/16 - 10/16

3/17 - 4/17

Undisclosed (110?)

Undisclosed (110?)

[Hurricane Energy]

UKNS

[Repsol]

NNS

Click to enlarge

5. Midwater Floaters

Midwater floater: (21)

1,000'-3,600'/25,000'

Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1

Sedco 712

1983

Semi

10/16

409

[Talisman]

UKNS

2

Transocean Winner

1983

Semi

7/16

495

[Marathon] Norway

3

Sedco 704

1993

Semi

8/16

N/D (110?)

[Independent O&G]

UKNS

(3d) 2Q'16

4

GSF Rig 140

1983

Semi 8/16 158

[Oil India]

India

(17d) 2Q'16

5

Actinia

1982

Semi 5/19 101

[ONGC]

India

(57d) 2Q'16

Click to enlarge

6. High-Specification Jackups

High-specification Jackup: (11)

350'/400'-30,000'/35,000'

Year built

Contract

End

Current

Day Rate

K $

Location
1

GSF Constellation I

2003

12/16

85

[Bunduq]

UAE

(4d)Q2'16

2

GSF Galaxy I

2001

11/16

11/16-5/17

5/17-5/18 Option

5/18-5/19 Option

228

231

-

-

-

[Total]

UKNS

3

Transocean Andaman

2013

5/17

5/17-5/18 option

115

110

[Chevron] Thailand

4

Transocean Siam Driller

2013

3/18

140

[Chevron] Thailand

5

Transocean Ao Thai

2013

10/18 139

[Chevron] Thailand

Click to enlarge

7 - Stacked and Idle Rigs

Name Year built

Contract

End

Location
Cold stacked rigs
1 Discoverer Spirit 2000 3/15 Trinidad and Tobago
2 GSF Jack Ryan 2000 3/15 Trinidad and Tobago
3 Deepwater Discovery 2000 3/15 North Atlantic
4 Deepwater Pathfinder 1998 3/15 Trinidad and Tobago
5 GSF C.R Luigs 2000 6/15 Trinidad and Tobago
6 GSF Galaxy III 1999 7/15 Denmark
7 GSF Monarch 1986 7/15 North Atlantic
8 Discoverer Enterprise 1999 9/15 US GOM
9 Sedco Energy 2001 9/15 Canari Islands
10 Sedco Express 2001 9/15 Cameroon
11 Transocean Searcher 1988 9/15 NS
12 Transocean Prospect 1992 9/15 UK
13 GSF Galaxy II 1998 9/15 UK
14 Discoverer Champion 2011 2/16 GoM
15 Discoverer Deep Seas 2001 2/16 GoM
16 Deepwater Frontier 1999 11/15 Riau Archipelago
17 GSF Development Driller II 2005 1/16 North Sea
18 Polar Pioneer 1985 12/15 Canada
19 Transocean Marianas 1979-1998 3/16 South Africa
20 Sedco 711 1982 1/16 North Sea
21 Sedco 714 1997 11/15 North Sea
22 Discoverer Americas 2009 12/1 North Sea
23 Deepwater Millennium 1999 5/16 Asia
24 Cajun Express 2001 6/16 West Africa
25 GSF Development Driller I 2005 5/16 West Africa
26 GSF Constellation II 2004 JU 5/16 West Africa
27 Transocean Honor 2012 JU 5/16 West Africa
28 Transocean Driller 1991 6/16 Brazil
Idle Rigs
1 Transocean Barents 2009 9/15 NS
Rig held for sale/recycled.
1 GSF Rig 135 1983/3G 8/15 Nigeria
2 GSF Grand Banks 1984 10/15 Canada
3 Deepwater Navigator 2000 1/16 Brazil
4 Transocean John Shaw 1982 4/16 NS
5 Sedco 702 2007 4/16 West Africa
Click to enlarge

Fleet Analysis Snapshot

Rig fleet per category (minus recent scrapped rigs or held for sale):

Total UDW

Deepwater

semi-subs

HE Deepwater Semi-subs. Midwaters Jackups
Number of Rig working 32 13 4 5 5 5
Cold stacked/idle 29 17 2 2 6 2
Newbuild rigs 10 5 - - -

5

Total 71 35 6 7 11 12
Click to enlarge

Note: Held for sale are not included.

Click to enlarge
Commentary:

Transocean released its July fleet status yesterday, and it is invariably a significant event for the offshore drilling industry, because the company has always harbored, and by far, the highest backlog among its peers such as Noble (NYSE:NE), Ensco (NYSE:ESV), Diamond offshore (NYSE:DO) or Seadrill (NYSE:SDRL) -- Please see the chart below --

Thus, the company could be qualified as a "bellwether" for the offshore drilling industry that gauges accurately how the industry is actually coping with this terrible market environment.

What can we say about the present market paradigm?

Well, not much, unfortunately... It is quite obvious that we are entering the most difficult part of this bear cycle, with fewer contracts negotiated often at a dismal day rate (not even disclosed in some cases). However, it seems that we have reached a rock bottom and we should be able to experience a timid recovery by H2 2017. The issue is that the recovery will not translate immediately with an increase of day rate which is supposed to happen many months later and depending on the rig oversupply situation.

One component that may support the revival of the industry in 2017 is the oil prices that should be at a level that will allow O&G operators to commit more exploration CapEx. Already oil prices have stabilized between $44 to $50 which is a big difference but still insufficient for the oil industry.

Most of the drillers are experiencing a steady backlog erosion which appears to be accelerating recently due to a number of early terminations for convenience, mainly in the deepwater segment, in West Africa, North Sea and the Gulf of Mexico.

Transocean, is fighting the trend, and has secured the few contracts that were available. For example, the Jack Bates got awarded a 2-year contract with ONGC at $127k/d in India. Please read my preceding article regarding this issue, click here.

The day rate will be approximately $127k/d for 730 days, which means a contract backlog of $93 million.

What has changed from April to July FSR?

  • In May, the Deepwater Proteus commenced operations in the Gulf of Mexico for Shell.
  • The Jack Bates has been awarded a 2-years contract with ONGC in India. Backlog estimated $93 million.
  • The Sedco 704 Awarded one-well contract in UK NS with Independent O&G at an undisclosed day rate.
  • The Transocean Spitsbergen awarded two small contract in North Sea.
  • 28 rigs are now classified as cold stacked and one rig as idle. The cold stacked rig count went up 6.
  • 5 rigs are "held for sale" to be recycle. Including the Sedco 702 now. " The rig will be recycled in an environmentally responsible manner."
  • 155-day zero rate for 2016.

Average day-rate in 2016 per segment.

Rig Segment

1Q'16

in $K/d

2Q'16

in $K/d

3Q'16

in $k/d

4Q'16

in $k/d

UDW 490 503 479 480
Harsh Environment 402 344 320 359
DeepWater 310 239 223 203
MidWater 361 305 237 147
Jackup 150 138 141 142
Click to enlarge

Conclusion:

It is a long way to recovery, that's for sure. However, assuming that the oil prices will eventually trend up, it is evident that RIG is now trading at support around $11+.

Click to enlarge

Unless, something changes drastically, the chart is indicating a bullish trend (potential of a golden cross), which may suggest higher highs/higher lows situation.

However, it will be confirmed only if oil prices can resume a positive trend and breach decisively the $50/$55 barrier. If not, we may well retest the $8.50 again.

I will be more confident if RIG can retest successfully the 50MA around $11 first, and then, resume a positive trend that may indicate a $15/$16 potential by 3Q'16.

Important note: Do not forget to become one of my followers on RIG and other offshore drillers. Thank you.

Disclosure: I am/we are long RIG.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade the stock as well.