Transocean -2% as speculative builds hint at move toward Seadrill model

The biggest story from Transocean's (RIG -2%) Q4 results might be the big shift in the offshore driller's business strategy that makes its model look more like Seadrill's (SDRL) - and investors today don’t seem too thrilled.

RIG is agreeing to build two new ultra-deepwater drillships with options to build three more; RIG has historically been unwilling to build on speculation without contracts in hand, thus the announcement of two rigs and three options is a "radical change" from the past, UBS analyst Angie Sedita says.

The firm believes RIG can contract the rigs at economically viable dayrates, but additional rigs into an already over-supplied market will be challenging.

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Comments (7)
  • wigit5
    , contributor
    Comments (4365) | Send Message
    ah the ultimate form of flattery?
    27 Feb 2014, 01:04 PM Reply Like
  • bearishly
    , contributor
    Comments (13) | Send Message
    It's because Esa Ikaheimonen was Seadrill's CFO for 2 years before he came to RIG in late 2012. Apparently he brought the onions, since Seadrill's going on about being a 'responsible market leader' and not building anymore. Build-low (now), contract-high (later) while you have the chance. This also isn't the first spec build, there was a 5 jackup program announced last quarter. They're drawing down cash they built up for legal defense earlier.
    27 Feb 2014, 01:12 PM Reply Like
  • jzut
    , contributor
    Comments (153) | Send Message
    Check a 2 year chart. Buy low and be patient. 56 cents a quarter divie. 5+% yield.
    27 Feb 2014, 02:32 PM Reply Like
  • FJ Miller
    , contributor
    Comments (6) | Send Message
    By the time possession of rigs takes place market absorption will be well underway
    27 Feb 2014, 02:41 PM Reply Like
  • long_on_oil
    , contributor
    Comments (1369) | Send Message
    Personally this tickles the crap out of me. Sea Drill's management has been criticized for not being more like Transocean and now the truth comes out. Sea Drill has great management and their model is one to follow. The old saying, "lead, follow or get out of the way" Transocean has chosen to follow and this shows me Rigs management is learning and adapting. Bravo RIG, Bravo SDRL.
    This move should be major in giving Sea Drill the credibility they deserve and now the stock price will move up accordingly.
    27 Feb 2014, 06:20 PM Reply Like
  • Budavar
    , contributor
    Comments (1418) | Send Message
    Now all RIG has to do is to follow SDRL some more by pushing the dividend envelope even harder.
    Pushing the dividend envelope hard maybe good for the two largest stakeholders in both companies, but what about the rest of us?
    27 Feb 2014, 11:18 PM Reply Like
  • AGK52
    , contributor
    Comments (4) | Send Message
    RIG fleet is very old (most of it) and many ships has to be retired soon, so they are trying to get some facelift. But big question is if they have enough resources to make it and to survive. Another big question is if their weak management team will be able to take them trough rough seas. Company performance is deteriorating and even Icahn intervention did not make any difference. This is dead company with no future.
    28 Feb 2014, 08:29 AM Reply Like
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