What To Watch As Transocean Reports Q4 Results

by Trefis Team
Transocean Limited
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Transocean (NYSE:RIG), one of the largest offshore drilling contractors, is expected to publish its Q4 2018 results on February 19, reporting on a quarter that saw the company close its acquisition of offshore driller Ocean Rig. While crude oil prices have been on a downtrend, it’s likely that Transocean’s key operating metrics continued to improve over the quarter, driven by its push towards newer and more sophisticated rigs in the deepwater and harsh environment markets. Here’s a quick rundown of what to expect when the company reports earnings Tuesday.

We have also created an interactive dashboard analysis on the expected outlook for Transocean, which you can use to arrive at your own revenue and EPS estimates for Transocean. See all of our data for Energy Companies here.

Day Rates In Focus

While ultra-deepwater day rates have remained depressed, falling to about $341k in Q3 2018 from $449k in the year-ago period, Transocean has noted that rates for ultra-deepwater drillships were likely to increase through 2019 and 2020, driven by an improving market as well as the company’s focus on newer and more sophisticated rigs. Big oil companies are likely to approve about 110 offshore projects this year, up from 96 projects in 2018 and 43 projects in 2016, according to Rystad Energy. However, it’s possible that rates could remain below historical levels. For instance, Transocean recently scored an $830 million contract with Chevron for one of its newbuild drillships, which will work for five years in the Gulf of Mexico starting from 2021. However, the day rates on this contract are estimated to come in about $455k per day, despite the fact that Transocean has to make additional investments in this newbuild rig to meet Chevron’s specifications.

Utilization Rates Could Improve

Over Q3, fleetwide utilization rates improved to levels of about 65%, up from 52% in the same period last year, and it could see an improvement over Q4 as well driven by the Ocean Rig acquisition, which the company closed in early December. The deal added 11 high-specification ultra-deepwater drillships (two of which are under construction) and two harsh environment semi-submersibles, which are much sought-after, to the company’s fleet.

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