Key Takeaways From Transocean’s Q2 Results

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Transocean (NYSE:RIG) recently published its Q2 2018 results, posting a smaller than expected loss while beating market estimates on revenues, driven by the performance of some of its newer and more capable rigs. Below, we take a look at some of the key operating metrics from the company’s earnings release.

We have also created an interactive dashboard analysis on Transocean’s expected 2018 resultswhich you can use to arrive at your own revenue and EPS estimates for Transocean.

Revenues Expand Sequentially On New Acquisitions

Transocean’s drilling revenues grew by about 19% sequentially to $790 million, as it was the first full quarter since the company acquired four harsh environment semisubmersibles from Songa and the new ultra-deepwater drillship, Deepwater Poseidon. Additionally, the company’s revenue efficiency, which is a measure of how much revenue a rig actually earns while it is contracted versus the maximum that it could potentially earn, also rose to 97.4%, compared to 91.5% in the previous quarter, helping overall drilling revenues.

Utilization Rates

Transocean currently has a fleet of 43 mobile offshore rigs including 24 ultra-deepwater floaters and 12 harsh environment floaters. Utilization rates for harsh environment rigs remained relatively strong at 81%, marking an improvement from about 62% last year, likely due to the semisubmersibles from Songa. While utilization rates for the company’s ultra-deepwater rigs remained under pressure at 47%, on account of oversupply in the market, it still marks an improvement from the 38% levels seen last year due to the company’s fleet rationalization program.

Dayrates Remain Under Press In The Ultra-Deepwater Space

Although crude oil prices have witnessed an improvement over the last several months, leading to slightly higher offshore drilling activity, the oversupply of ultra-deepwater rigs has kept the extent of the recovery in check for Transocean. The company’s ultra-deepwater rigs saw day rates decline by about 21% year-over-year to $387k, due to the glut in the market. However, harsh environment rigs saw day rates rise by 16% to $305k, as the harsh environment market has been quite strong, driven by demand from the Norwegian sector.

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