Why Did Transocean’s Stock Price Rise 15% In A Single Trading Day?
The slump in the commodity markets that began in mid-2014 has deteriorated the market value of a majority of the companies in the oil and gas value chain. The plunge in commodity prices led to a sluggish drilling demand, as oil and gas majors across the globe reduced their exploration and drilling spending to weather the downturn. This further resulted in pricing pressure for large drilling contractors such as Transocean, as oil and gas companies started looking for cost-efficient rigs to optimize production from their existing wells. As a result, the Swiss company witnessed a sharp decline in its contract backlog, as well as average dayrates. Due to this, the world’s largest offshore drilling contractor experienced a 75% drop in its stock price over the last two years.
While the outlook for commodity markets has been bearish, crude oil prices have rebounded over the last couple of months due to a number of factors, such as oil supply disruption in Canada, Nigeria, Libya, and Venezuela, and strong demand for oil from the Asian markets. In consequence, crude oil prices have recovered almost 35% since the beginning of the year, and are currently trading at a little over $50 per barrel. Further, for the second time in 2016, the US Oil Rig Count has increased, reassuring investor confidence in the recovery of the commodity markets. As a result, the stock of oilfield services companies, like Transocean, have gained momentum. Apart from this, a key factor for improvement in Transocean’s stock was the recent contracts that the company won in the Asian and Latin American markets. While the length and the average dayrates of these contracts are not very attractive, the market is viewing this as a sign of resilience, causing Transocean’s stock to go up by almost 15% in a single trading day.
- How Will Transocean Weather The Lull In The Offshore Rig Market?
- How Are Transocean’s Key Metrics Expected To Trend?
- Key Takeaways From Transocean’s Q4 Results
- What To Watch As Transocean Reports Q4 Results
- What’s The Outlook Like For Transocean In 2019?
- What’s Transocean’s Outlook Like After Solid Q3?
While the improvement in crude oil prices and rig count can be seen as a sign of rebound in the commodity markets, it might be too early to know if this recovery is sustainable.
Have more questions about Transocean (NYSE:RIG)? See the links below:
- What Will Be Transocean’s Liquidity Position At The End Of 2016?
- How Will Different Rig Count And Average Daily Rates Combinations Impact Transocean’s Contract Drilling Revenue In 2016?
- Lower Impairments Augment Transocean’s 1Q’16 Earnings; Contract Backlog Continues To Decline
- Plummeting Commodity Prices Likely To Pull Down Transocean’s 1Q’16 Results
- How Is Transocean’s Contract Backlog Correlated To Crude Oil Prices?
- How Will Transocean’s Revenue Move If Crude Oil Prices Average At $50 Per Barrel In 2018?
- How Will Transocean’s Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- How Has Transocean’s Revenue And EBITDA Changed Over The Last 5 Years?
- How Has Transocean’s Revenue And EBITDA Composition Changed Between 2010 And 2015?
- What Was Transocean’s Revenue And EBITDA Composition In 2015?
- Transocean’s Earnings Suffer Due To Weak Drilling Demand; Diminishing Backlog Likely To Cause Further Damage
- What To Expect From Transocean’s 2015 Financial Results?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Transocean
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