Transocean Set For Success To $77
Transocean has been a stock we have been watching closely recently. They have been working hard towards success in their offshore operations. Analysts are expecting Transocean’s stock to grow to $77, and the Trefis Team explains how RIG will get there.
Ultra Deepwater segment driving contract activity
Transocean added $1.5 billion in new contracts in Q2 with offshore activity being driven by new discoveries in Ghana, Vietnam, Brazil and the U.S. Gulf of Mexico. [1] The resumption of activity in the Gulf of Mexico, the commencement of operations of Deepwater Champion in the Black Sea and an improvement in revenue efficiency led to an increase in the profitability in the segment.
With the ultra deepwater market tightening, Transocean finished a $7 billion program to add 10 new rigs that would help it expand to become the largest player in the high-spec segment.
Transocean is also continuing its efforts to reduce its exposure to the low-spec segment with the sale of three Jackups and a swamp barge. Day rates and utilization in the Ultra deepwater segment are much higher than in other segments because of the fewer number of rigs that can operate in the demanding conditions.
Higher capex and maintenance costs
Transocean reported increased operating costs in Q2 over the previous quarter with higher maintenance and contract preparation costs. [2] The company increased its cost guidance estimates slightly as contract preparation costs are expected to increase as customers look for more specialized equipment.
The capital expenditure is expected to be around $1.1 billion as the company looks to focus on the high end segment. Transocean expects to cut down on the out of service time for its fleet for the rest of the year. However higher contract activity can push up rig reactivation costs putting pressure on the company’s margins over the short term.
Now that you can see where Transocean is going, and understand the goals they have set out to reach, you can better understand why their stocks are expected to rise. This company is working hard to be the best, and they on track to success.
Quotes taken from report by The Trefis Team, Read the entire article here.
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