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Transocean: Discussing The Q1 Earnings Report

May 01, 2018 6:39 PM ETTransocean Ltd. (RIG)99 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Transocean publishes its Q1 report, missing expectations.
  • The stock follows the pattern seen after other drillers' reports.
  • The company speculates about M&A during the earnings call.

Earnings season for offshore drillers continues, and it's high time to discuss Transocean's (NYSE:RIG) earnings report. The price action after the release of earnings reports has been universal for all drillers so far, be it Transocean, Rowan (RDC), Diamond Offshore (DO) or Ensco (ESV) - the stock price drops. In my opinion, this means that actual results don't live up to expectations after the recent rally in drillers' shares. Weaker financial results from drillers shouldn't be such a surprise for the market, but they are. As it often happens, market needs to look at the data to start adjusting prices even if something is "obvious."

As with the previous drillers' reports, we'll take a quick look at actual earnings (which impact the very short-term price action) and then proceed to the discussion of longer-term drivers that ultimately impact the stock price.

For the first quarter, Transocean reported an adjusted net loss of $210 million, or $0.48 per share. The company continued to generate cash thanks to better-era long-term contracts, but depreciation and interest expense pushed the accounting results into the red zone. Again, it's hard to tell why this is such a surprise for the market - drillers' financials will be under pressure until recovery starts happening across all segments. Anyway, the near-term reaction to a headline earnings miss is not that important. The outlook for the future and the company's plans are the things to watch. On this front, there was a surprise (at least for me) during the earnings call.

Here's what the company stated regarding potential acquisitions:

As we progress through 2018, we will continue to evaluate acquisition targets with characteristics similar to what we found in Songa including high-specification assets that will strengthen our fleet and some balance of backlog and maturity that will no significantly impact

This article was written by

Vladimir Zernov profile picture
I'm a trader who trades both short-term and long-term. I started my career as a day-trader for a trading firm, but then turned to longer time frames and went on my own to manage my portfolio. I use technical analysis as well as fundamental analysis in my research.

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