Transocean: Disappointing Contracting Activity And More Dilution Ahead – Hold


  • News of OPEC+ phasing out voluntary production cuts later this year caused crude oil prices to tumble to new four-month lows.
  • Not surprisingly, offshore drilling stocks have sold off alongside the commodity, with highly leveraged market leader Transocean underperforming peers.
  • The company announced an aggregate $161 million in contract extensions and option exercises for a number of harsh environment floaters, but overall contracting activity remains disappointing.
  • Transocean also disclosed its intent to acquire the remaining 67% in the 6th generation harsh environment rig Transocean Norge against a combination of new common shares and senior notes.
  • Valuation-wise , the company remains expensive relative to peers. With the stock price close to my $5.50 price target, I am reiterating my “Hold” rating on the shares.
Transocean drillship at the entrance of Guanabara Bay



I have covered Transocean Ltd. or “Transocean” (NYSE:RIG) previously, so investors should view this as an update to my earlier articles on the company.

News of OPEC+ starting to phase out voluntary production cuts later this year caused crude

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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