Transocean Ltd. - Complete Fleet Analysis As Of December 18 And Commentary

| About: Transocean Ltd. (RIG)
This article is now exclusive for PRO subscribers.

Summary

Transocean Ltd, released its fleet status on December 18. I noticed four new contracts or extensions, and an effort to retire and scrap a total of eleven aging rigs.

Transocean is adding a total of $453 million in new contracts which is quite remarkable in this extremely challenging environment. RIG announced that it will impair seven rigs in Q4.

RIG has lost over 60% of its value since January 2014 and presents an opportunity if oil price can find some support again.

Picture: GSF Arctic I (To be retired.)

Transocean Ltd. (NYSE:RIG)

This article is an update of my preceding article on the Transocean fleet status November 18.

Complete fleet status as of December 18, 2014.

Link: Fleet status December 18, 2014.

  1. Rigs under construction.
# RIG K feet Delivery Contract End

Day Rate

K $

Location
Ultra-deepwater Drillships
1 Deepwater Thalassa 12/40 Q1/16 Q1/16-Q1/26 519 TBA Shell
2 Deepwater Proteus 12/40 Q2/16 Q2/16-Q2/26 519 TBA Shell
3 Deepwater Pontus 12/40 Q1/17 Q1/17-Q4/26 519 TBA Shell
4 Deepwater Poseidon 12/40 Q2/17 Q2/17-Q2/27 519 TBA Shell
5 Deepwater Conqueror 12/40 Q4/16 Q4/16-Q4/21 599 US GOM Chevron
6 JSPL Ultra-deep Espadon TBN 1 12/40 2017 Available - -
7 JSPL Ultra-deep Espadon TBN 2 12/40 2018 Available - -
High-specification Jackups
1 Transocean Cepheus 400/35 2016 Available -
2 Transocean Cassiopeia 400/35 2016 Available -
3

Transocean

Centaurus

400/35 2016 Available -
4 Transocean Cetus 400/35 2017 Available -
5

Transocean

Circinus

400/35 2017 Available -
  1. High-specification floaters: Ultra-deepwater.

High-specification Floater

Ultra-deepwater Rigs

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

Year built Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1 Deepwater Asgard 2014 Ship 7/17 600 TBA
2 Deepwater Invinctus 2014 Ship 3/17 595 US GOM
3 Discoverer Americas 2009 Ship 3/16 735 Other sub-sahara
4 Discoverer Champion 2011 Ship 11/15 677 US GOM
5 Discoverer Clear Leader 2009

Ship

Owned by Transocean Partners LLC 49%

8/18

590

US GOM
6 Discoverer Inspiration 2010

Ship

Owned by Transocean Partners LLC 49%

3/15

3/15-3/20

523

585

US GOM
7 Dhirubhai DW KG1 2009 Ship 12/17 443

[Petrobas] Brazil

0 rate 91d (Q4/14) 30d (Q4/15)

8 Dhirubhai DW KG2 2010 Ship

2/15

2/15-7/15

510

395

[Reliance] India

Fixed Priced option 7/15-10/15 $395K

0-rate 61d (Q4/15)

9 Discoverer India 2010 Ship

9/16

9/16-11/20

528

508

US GOM

India

10 Petrobras 10000 2009 Ship 7/19 446 South America
11 Discoverer Deep Seas 2001 Ship 11/16 608 US GOM
12 Discoverer Enterprise 1999 Ship

1/15

1/15-3/15

615

399

US GOM
13 Discoverer Spirit 2000 Ship

Available/

Inspection

US GOM

14 GSF C.R Luigs 2000 Ship

Available/

Inspection

US GOM
15 GSF Jack Ryan 2000 Ship Idle Spain
16 Deepwater Discovery 2000 Ship Idle Nigeria
17 Deepwater Frontier 1999 Ship 12/14 565 Australia
18 Deepwater Millenium 1999 Ship

3/15

3/15-3/16

565

600

Australia
19 Deepwater Pathfinder 1998 Ship

Idle

(3/15*)

-

(681*)

*ENI repudiated the contract. RIG is contesting and suing ENI for loss profit.
20 Deepwater Expedition 1999 Ship Idle - India and Middle East
21 Cajun Express 2001 Semi

11/14

12/14-12/15

487

495
Senegal
22 Deepwater Nautilus 2000 Semi 8/17 531

[Shell]

US GOM

0-rate

28d (Q1/15) 91d (Q2/15) 15d (Q3/15)

23 GSF Explorer 72/98 Ship Idle US GOM
24 Discoverer Luanda 2010 Ship 1/18 483 Angola and Namibia
25 GSF Development Driller I 2005 Semi 5/17 382

(Exxon Mobil) Angola

Zero-rate 20d (Q4/14) 78(Q1/15)

26 GSF Development Driller II 2005 Semi 7/15 355 Romania
27 Development Driller III 2009

Semi

Owned by Transocean Partners LLC 49%

11/16 431 US GOM
28 Sedco Energy 2001 Semi 10/15 380 Congo
29 Sedco Express 2001 Semi 1/15 300

[CAMAC] Nigeria

  1. High-specification floaters: Deepwater.

High-specification floater: Deepwater (12)

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

Year built Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1 Deepwater Navigator 2000 Ship 2/16 371

[Petrobas] Brazil

0-rate 8d(Q4/14)

2 Discoverer Seven Seas 1997 Ship Idle TBA
3 Transocean Marianas 1998 Semi 3/15 370

South

Africa

4 Sedco 706 2008 Semi 9/16 300 Brazil
5 Sedco 702 2007 Semi 2/16 461 Nigeria
6 Sedco 707 1997 Semi 12/14 388 [Petrobas] Brazil
7 GSF Celtic Sea 1998 Semi

1/15

1/15-3/15

328

338

[Exxon/Vaalco] Angola

0-rate 5d (Q4/14)

8 Jack Bates 1997 Semi

12/14

12/14-5/15

5/15-2/16

440

420

370

[ENI-Impex]

Australia

Australia

0-rate 4d (Q4/14)

9 M.G Hulme Jr 1996 Semi

12/14-3/15

200

N/K
10 Sedco 710 2001 Semi

Cold-stacked

[for sale/scrapping]

Spain
11 Transocean Rather 1988 Semi

Cold-stacked

Malaysia
12 Sovereign Explorer 1984 Semi

Cold-stacked

[for sale/scrapping]

US GOM
13 CK Rhein Jr. 1976 Semi

Cold-stacked

[for sale/scrapping]

Malaysia
14 Sedneth 701 1973 Semi

Cold-stacked

[for sale/scrapping]

Africa

Congo

15 Sedco 709 1977 Semi

Cold-stacked

[for sale/scrapping]
Malaysia
16 Sedco 703 1974 Semi

Cold-stacked

[for sale/scrapping]
Malaysia
  1. High-specification semi-submersible: Harsh environment.

High-specification floater: Harsh environment (7)

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

Year built Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1 Transocean Barents 2009 Semi 9/15 591 Norway
2 Transocean Spitsbergen 2010 Semi

Suspended by Statoil for the rest of 2014

(535)25% Norway
3 Henry Goodrich 2007 Semi 3/15 476 Canada
4 Transocean Leader 1997 Semi

3/15

3/15-5/18

5/18-5/19

400

335

305

Norway

UKNS

UKNS

5 Paul B. Loyd,JR 1990 Semi

3/15

3/15-8/15

8/15-3/16

3/16-9/16

9/16-3/17

3/17-6/17

444

426

433

439

446

453

UK
6 Transocean Arctic 1986 Semi

1/16

1/16-6/16

409

509

Norway
7 Polar Pioneer 1985 Semi

2/15

2/15-3/15

3/15-4/15

4/15-6/15

6/15-10/15

12/15

12/15-3/16

3/16/6/16

6/16-10/16

10/16-12/16

12/16-6/17

592

561

592

561

623

561

592

561

623

561

592

Alaska
  1. Midwater floaters.

Mid-water floater: (21)

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

Year built Ship or Semi

Contract

End

Current

Day Rate

K $

Location
1 Sedco 700 1997 Semi

Cold-stacked

[for sale/scrapping]

Malaysia
2 Transocean Legend 1983 Semi 1/15 425 Australia
3 Transocean Amirante 1997 Semi 11/15 335 Undisclosed location
4 GSF Arctic I 1996 Semi

Cold-stacked

[for sale/scrapping]

North Africa and Mediterranean
5 Transocean Driller 1991 Semi 7/16 264 South America
6 GSF Rig 135 1983 Semi 5/15 311 Other sub-sahara
7 GSF Rig 140 1983 Semi 12/14 260 India and Middle East
8 GSF Aleutian Key 2001 Semi

Cold-stacked

Gabon
9 Sedco 711 (1) 1982 Semi

12/14

12/14-6/15

6/15-12/15

355

361

366

UK
10 Transocean John Shaw (1) 1982 Semi

12/14

12/14-12/15

356

411

UK
11 GSF Arctic III (1) 1984 Semi Idle UK
12 Sedco 712 (1) 1983 Semi

3/15

3/15-10/15

10/15-3/16

3/16-10/16

391

397

403

409

UK
13 Sedco 714 (1) 1997 Semi

9/15

9/15-3/16

437

443

UK
14 GSF Grand Banks 1984 Semi 9/15 408 Canada
15 Actinia 1982 Semi 7/15 190 India and Middle East
16 Sedco 601 1983 Semi

Cold-stacked

[for sale/scrapping]

South Asia
17 Transocean Winner 1983 Semi

7/15

7/15-7/16

447

499

Norway
18 Transocean Searcher 1988 Semi 5/15 387 Norway
19 Transocean Prospect (1) 1992 Semi

1/15

1/15-5/15

409

373

UK
20 J W. McLean (1) 1996 Semi

Cold-stacked

[for sale/scrapping]

UK
21 Sedco 704 (1) 1993 Semi

8/15

8/15-2/16

369

369

UK
22 Falcon 100 1974 Semi

Cold-stacked

[for sale/scrapping]

Africa

(1) Part of Caledonia Offshore potential separation.

CEO, Steve Newman, has stated that despite the large impairment this quarter, the company is likely to cold stack more rigs in the future:

With respect to our non-core floater fleet, we intend to scrap certain cold-stacked rigs, recognizing their limited potential to re-enter the market. The company will continue to assess the competitiveness of non-core assets on a case-by-case basis and we are likely to retire additional rigs.

6 - High specification Jackups.

High Specification Jackup: (11)

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

Year built

Contract

End

Current

Day-rate

K $

Location
1 GFS Constellation I 2003 1/16 150 South Asia
2 GFS Constellation II 2004 7/15 165 Other sub-sahara
3 GFS Galaxy I 2001 4/17 216 UK
4 GFS Galaxy II 1998 1/15 221 UK
5 GFS Galaxy III 1999 3/15 175 Denmark
6

Transocean Honor

2012

4/15

4/16

155

194

Angola

Angola

7 GSF Monarch 1986 3/15 169 UK
8 Transocean Andaman 2013 5/16 145 South Asia
9 Transocean Siam Driller 2013 3/18 139 South Asia
10 Transocean Ao Thai 2013 9/18 135 South Asia

Fleet analysis snapshot.

1 - Rig fleet per category:

Total UDW

Deepwater

semi-subs

HE Deepwater Semi-subs. Midwaters Jackups
Number of Rigs 84 29 16 7 22 10
New rigs 12 7 - - -

5

Total 96 36 12 7 21 15

2 - Rigs' status excluding newbuilds.

Idle/Ready stacked

/Inspection

/Out of service

Cold stacked Working Rig Total
HS UltraDeepwaters 6 0 23 29
HS Deepwaters 1 7 8 16
HS Semi-submersibles 0(+1)* 0 7(-1)* 7
Midwater floaters 1 6 15 22
HS Jackups 0 0 10 10
Total 8(+1) 13 63(-1) 84

*Transocean Spitsbergen has been suspended by Statoil at 25% day-rate for the remaining of 2014.

Commentary:

Changes since last month:

[Positive] Four contracts were signed this month:

  1. GSF Development driller I, got a contract in Angola, with Exxon Mobil, for $382k/d until May 2017.
  2. Jack Bates, Option 9-months exercised in Australia by Impex at $370k/d.
  3. Dhirubhai Deepwater KG2, got five-month contract extension in India at $395K/d.
  4. Sedco Express, got a 45 day contract in Nigeria with CAMAC for $300K/d.

[Negative] Four rigs Idle this month.

  1. Deepwater Pathfinder is now idle after ENI repudiated the contract ending March 2015 for $681K/d. Transocean is suing ENI for loss of profit.
  2. Three more new rigs were idle this month; Deepwater Expedition, GSF Explorer and Discoverer Sevan Seas.

[Retiring/Scrapping]

The company indicated that it added seven new rigs to the four already retired for scrapping. The company will have a non-cash impairment between $100 million to $140 million in Q4.

Sedco 71, Souvereign Explorer, Sedco 700, Sedco 601, J. W McLean, GSF Arctic I, Falcon 100, Sedneth 701, Sedco 703, Sedco 709, CK Rhein Jr.

I believe this list will get even larger early next year: The company has already two more cold stacked rigs that are not included in the list above. GSF Aleutian Key and Transocean Rather. Furthermore, the company has seven rig idle: GSF Arctic III, Discoverer Seven Seas, GSF Explorer, Deepwater Expedition, Deepwater Pathfinder, Deepwater Frontier, Deepwater Jack Ryan.

This list is not including the Transocean Spitsbergen, and two rigs available, Discoverer Spirit and GSF CR Luigs.

Conclusion:

Transocean Ltd, is obviously in a difficult business position at the moment, and seems to act responsibly about this uncanny situation, by managing logically its large rig fleet.

The retiring and scrapping process is accelerating, due to a tremendous drop in the price of oil, which is reducing severely the offshore contract opportunities. The company has now 11 rigs cold-stacked, for sale, and should increase this amount to about 14 by Q1 2015.

I counted 19 rigs (including the jackups segment,) which will go off contract in the first half of 2015.

This is a painful process, no doubt about it. However, it is a necessary cleansing, because RIG has a large fleet, which includes many old rigs that are nearly obsolete, and will not be able to compete in this harsh business environment.

I have been a RIG long shareholder for many years, and I believe this bearish cycle is a good opportunity to accumulate again.

RIG has lost over 60% since January 2014 and is now at an attractive level if oil can finally find some support?

RIG Chart

RIG data by YCharts

I am glad the company maintained its $3/year dividend, so far. However, I think the dividend will be reduced or suspended next year, to reflect the new business paradigm, like Seadrill (NYSE:SDRL) did recently.

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.