Transocean Ltd. (RIG) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the Q2 2021 Transocean Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Lex May, Manager of Investor Relations. Please go ahead. Lexington May: Thank you, Madison. Good morning and welcome to Transocean’s second quarter 2021 earnings conference call. A copy of our press release covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on our website at deepwater.com. Jeremy Thigpen: Thank you, Lex and welcome to our employees, customers, investors and analysts participating in today’s call. As reported in yesterday's earnings release for the second quarter Transocean delivered adjusted EBITDA of $255 million, on $713 million in adjusted revenue resulting in an adjusted EBITDA margin of over 36%. We continue to operate at a high level during the second quarter, as evidenced by our company best revenue efficiency of 98% in fact, even compared to a very strong first quarter, we still reduced our sequential downtime by over 14%. This reflects the steps we've taken to continuously improve our reliability, through our disciplined operational procedures. The extensive collaboration we engage in with our various equipment providers for the maintenance of our assets, and the broader use of our proprietary smart equipment analytic system, which enables us to identify anomalies, tailor our actions, and ultimately improve our reliability. As such, I would like to extend a sincere thank you to the entire Transocean team for the devotion that you demonstrate each and every day to deliver best-in-class service to our customers. You have shown tremendous strength and resilience throughout this pandemic, and I would like to acknowledge the personal sacrifices that you continue to make each and every day to keep our rigs operating safely, reliably and efficiently to support our customers. Mark Mey: Thank you, Jeremy, and good day to all. During today's call, I will briefly recap my second quarter results, provide guidance for the third quarter, then update you on liquidity forecast through 2022. As Jeremy stated, we delivered another very solid quarter due to the high level of performance of the entire Transocean team, particularly our offshore and onshore operations teams. As disclosed in our press release, we generated adjusted EBITDA of $255 million, reflecting robust revenue generation and cost discipline. Additionally, we further improve our industry leading EBITDA margin of 36%, a strong EBITDA results were partially driven by our fleet-wide revenue efficiency of 98%, showcasing operational excellence. Yet another quarter of excellence backlog conversion. Furthermore, this enabled us to generate cash flow from operations of approximately $153 million, which is a quarter-over-quarter improvement of $57 million. Additionally, we took several steps during the quarter to materially improve our liquidity. First, as Jeremy mentioned, we reached an agreement with Sembcorp, to deferred delivery and payment of both our new builds, the Deepwater Atlas and the Deepwater Titan. As a result, our liquidity is bolstered by over $450 million. We now expect to take delivery of the Atlas in December of this year and the Titan in May of 2022. For additional details please refer to our press release, on June 7th, our company, slide deck, posted on our website and our SEC filings. During the quarter, we launched at-the-market or ATM equity issuance program permits us to sell shares opportunistically up to a value of $400 million. As reflected in our 10-Q share sales under the program have generated approximately $145 million to-date, further improving our liquidity. Considering both the shipyard agreement and the ATM program, we improve liquidity of almost $600 million during the quarter. Looking closer to operating results, during the second quarter, we delivered adjusted contract rolling revenues of $713 million. This was above our guidance primarily due to stronger than forecasted revenue efficiency, as well as higher than expected activity. As a result of an early contract startup for the Deepwater Asgard coupled with the shifting of the shift your project from Q2 to Q3 associated with the deferral agreement and contract with the entire second quarter. Operating and maintenance expense straight in the quarter was $434 million, which is slightly below our guidance, primarily due to the formation Shipyard project shifting to the third quarter. Turning to the cash flow and balance sheet. We ended the second quarter with total liquidity of approximately $2.6 billion, including unrestricted cash and cash equivalents of approximately $1 billion approximately $300 million of restricted cash for debt service and $1.3 billion from our undrawn revolving credit facility. Let me now provide an update on our expectations for our third quarter financial performance. For the third quarter of 2021 we expect adjusted contract revenue of approximately $670 million, based upon an average fleet wide revenue efficiency of 96%. Our quarter-over-quarter decrease is mostly attributable to the early conclusion of operations on a Transocean Barents the Transocean enablers, special periodic survey Transocean Olga, rolling out contracts and Deepwater Nautilus shipyard, which was the third from the second quarter. These negative impacts were partially offset by a full quarter of activity on the Asgard and inspiration. We expect third quarter O&M expense to be approximately $427 million. Our quarter-over-quarter decrease explained that effect as previously mentioned. We expect G&A expense for the third quarter to be approximately $40 million in line with the second quarter. Net interest expense for the third quarter is forecasted to be approximately $113 million it includes capitalized interest of approximately $13 million. Capital expenditures including capitalized interest for the third quarter are forecasted to be approximately $19 million this increase approximately $75 million for our new build drill ships under construction and $15 million of maintenance CapEx. Cash taxes are expected to be approximately $11 million for the third quarter. Our liquidity, as of December 31, 2022 is estimated to be between $1.5 billion and $1.7 billion. This estimate includes the recently announced agreement with Sembcorp and the potential securitization, the Deepwater Titan. This liquidity forecast includes an estimated remaining 2021 CapEx of $630 million and 2022 CapEx expectation of $820 million. As always, our guidance excludes any speculative rig reactivations or upgrades. Our focus for the remainder of the year continues to be about optimizing cash flow generation to revenue enhancement and cost discipline. As the market continues to improve, as evidenced by our most recent fixtures, we are very mindful of reactivation expenses associated with our warm stacked asset. Furthermore, we will remain disciplined and will not reactivate cold stacked asset without a contract or contracts that justify the associated costs. In conclusion, we will continue to take steps to improve our balance sheet and enhance our liquidity. As we’ve already demonstrated, you can expect that we will continue to monitor the capital markets, and when appropriate, execute smart, timely, and strategic transactions. This conclude my prepared comments. I’ll now turn the call back over to Lex. Lexington May: Thanks, Mark. Madison, we’re now ready to take questions. And as a reminder to the participants, please limit yourself to one initial question and one follow-up question. Operator: Thank you. We'll go ahead and take our first question from Connor Lynagh with Morgan Stanley. Please go ahead. Connor Lynagh: Yes. Thanks. You had a couple comments in your prepared remarks about the value of consolidation. I'm just curious, how you're thinking about that in light of, you do have obviously some idled assets and obviously you need to continue to deliver the balance sheet. So just curious what your appetite and thinking around that dynamic to do be businesses? Jeremy Thigpen: Thanks. Thanks for the question. You're right, and we said for probably the last six years or so, that consolidation was necessary to get this piece of the industry healthy again. We've demonstrated that with the acquisitions of on our offshore ocean rig and of course the investment in the Transocean Norge. We think, more consolidation needs to take place and will now that some of our competitors have come out of the restructuring process. Obviously, as Transocean as the market leader, we get to look at everything that might be out there. And, of course, we're constantly looking for opportunities that might make sense for us. But as you mentioned, we have quite a few idle assets ourselves, and we can't do anything that will, in any way, weaken the balance sheet or compromise our liquidity position. So as we look at these, we look through those lenses. So, certainly, value and consolidation, we are actively exploring opportunities, but we have a very narrow focus. And so, I think, we've been pretty consistent with that direction over the past several quarters and years. Connor Lynagh: Thanks. Maybe just to follow up there. Are there any specific regions or types of assets out there in the world that you think would be better placed in your hands or you see sort of an opportunity to add to your portfolio? Jeremy Thigpen: I think, that we've been pretty consistent with that as well. High specification ultra-deepwater and harsh environment assets are really our focus. If you look at particular regions, obviously, we have pretty good strongholds in Norway and U.S. Gulf of Mexico. And so, I think, any asset would be better in our hands. But I'm biased. Connor Lynagh: All right. Appreciate it. Just one -- sort of, unrelated one really quickly is, how you're thinking about the ATM program and how you're planning to use that this year? Jeremy Thigpen: Thanks Connor. As I last said in my prepared comments, now this is an opportunistic program for us. We have no timeline. We're going to monitor the market, and as the opportunity presents itself, we'll take advantage of this program. As you know, it’s capped at $40 million. So it's not a lot of shares that we have, so we're going to be very careful about using it. Connor Lynagh: All right. Thanks very much. Operator: We will go ahead and take our next question from Greg Lewis with BTIG. Please go ahead. Greg Lewis: Yes, hey, thank you and good morning, everybody. Jeremy, you definitely kind of bounced around the various rig markets. I guess I just like to talk a little bit more about, maybe about West Africa. We saw the extension on that on the Skyros. It's interesting to me, it seems like at this point, the Gulf of Mexico is really sold out or pushing prices higher, it's hard to get a rig in the market. Could you talk a little bit more about West Africa, and what we're seeing and what maybe needs to happen so that West Africa has a higher cost base, and then Gulf of Mexico, how we could think about the path towards getting the rig -- the rig level economics to look a little bit more like the Gulf of Mexico than maybe they do today? Jeremy Thigpen: Yes, thanks for the question. And I'll defer to Roddie in just a second. But I think you heard me in my prepared remarks, maybe twice a day. It's a very challenging market. But that opportunities are presenting themselves and adding to the challenges that have historically been in West Africa, they don't have access to the company vaccines either. And so that makes changing crews and change personnel in that region extremely difficult. And that's going to create some further challenges and maybe slow the progress that we're seeing right there, but we are seeing some progress. And I'll defer to Roddie to give a few more specifics on that. Roddie Mackenzie: Yes. And so exactly to that point, the availability of vaccines, obviously, hampers how we can move people, but also just in general, how open to new business those regions are. But yes, so Africa and Asia are kind of like the last ones to see the uptick. The good news is that we're seeing that existing assets are getting rolled over. There are several interesting tenders out there. Just know there's going to be quite a few awards in Angola coming up. We also see that Ghana looks good and Nigeria is making some legislative changes to make it far easier to invest. So all those things bode well for Africa, but certainly a little bit trickier. The real uptake as you as you saw is in the Gulf of Mexico. But I think one of the themes we're going to see coming forwards is, the Golden Triangle, which includes Brazil uses the result of the water assets. And Brazil is really taken off. I mean, the boom is on and Brazil for sure. Tenders are up from Petrobras and the IOCs, but Petrobras in particular, not only renewing contracts and keeping the active rigs working long term, but actually increasing their rig count substantially over the next couple of years. So I'm really encouraged about Brazil. Certainly, you've already seen the fixtures that we've made in the Gulf of Mexico have been able to really push rates up just getting to what's an honest crust for the service we provide, but specifically to West Africa, things are improving, but as you say, it’s still at relatively high cost and not quite seeing the boom that we witnessed in the Gulf of Mexico and Brazil. Greg Lewis: Okay, great. And then I just kind of curious on your thoughts. Clearly I think people expect that the floating rig count to move higher over the next one, two years. A big question that's always out there is what is that orderbook are Briggs on their construction or shipyard still look like? You guys -- Transocean has their two rigs already, new builds address fixed. Roddie, had the conversation started between cold stacked rigs that maybe cost $50 million to $60 million competing against new build rigs that are in the shipyards that have never worked, any kind of dynamic around what customers are thinking about that, just kind of curious on your views because as we ramp up our rig count, it does still seem like there are a couple handfuls of rigs under construction, that probably have never drilled a well that that maybe want to get into this market and start making a little bit of money? Roddie Mackenzie: Yes, I think you'll see that, you know, so obviously there's a run on active rigs. But in terms of cold stacked rigs, I mean it's one thing for the call stacked rig to be already proven in operations prior to being stacked but bringing one out of the shipyard, fresh and doing the shakedown stuff introduces perhaps a little bit more risk on that side, so I think what we're seeing is, there's really enough work to go around now. I don't think that was a case a year ago, certainly it wasn't during COVID. But no, there really isn't any need to justify a loss-making reactivation. However, you choose to account for that or hide those numbers they are real. So we really don't see a tremendous number of rigs coming out of the yard to do this. I really think is going to have to be backed by a contract, so I think you'll see some reactivations where dayrates are solid, they are producing good EBITDA numbers than it makes sense to reactivate, but we really think the inflection points not quite there yet. We'd have to see your sustained numbers above 300,000 a day across the board, before we will see significant number of rigs coming out of shipyards, so I think you will see one or two that have big contracts on them but on the whole, we don't expect to see a lot of reactivated rigs in the next year. Greg Lewis: Okay, great. Thank you for the time everybody. Operator: Our next question comes from Taylor Zurcher with Tudor, Pickering, Holt. Taylor Zurcher: Hey, good morning, everyone and thanks for taking my question. My first one is on the 20,000 psi opportunity, you said it sounds like even though the FID date for Shenandoah continues to drift to the right that that seems to remain pretty committed to proceeding forward with that project. I guess my question is, one of your competitors this morning announced a multi-year contract for 20,000 psi work in the Gulf of Mexico that -- has that contract would have aligned pretty well with a potential follow on opportunity for the Beacon, or excuse me for the Atlas after its potential program with Beacon here and so I was just curious if you could give us an update on incremental 20,000 psi opportunities out there and call it 2023, 2024 plus type timeframe and thoughts on longer-term work for the Atlas following the potential for program with Beacon? Roddie Mackenzie: Yes. Sure. So with Beacon, they’ve continue to make really good progress. They've had a couple of milestones this week that we're encouraged by so we can't really talk about the details of that under our agreement with them, but we're very optimistic that moves ahead in the timeframe that we expect. So that's very positive. And the actual start date for the program is not slipping, so it's just a question of when they pull the trigger on that. In terms of the North Platte work that was announced. So that happened, you know, some time ago and our availability actually wasn't that good for it. We kind of had an overlap there. And then, certainly, it would have been interesting to put that work on the back end of it. However, we kind of felt that the race being discussed at that time weren't exactly where we would see that in that timeframe. So our -- keeping our powder dry and optionality whilst having the Beacon contract come to fruition, we think is a better strategy to basically drive the return for the substantial investment made in the 20,000 rig. So to your question about following opportunities, there are several actually in some operators have come to us directly and asked if they can put time on the rig. So it's looking pretty good. It's just a question of where we would like to be in terms of earnings on that thing. Taylor Zurcher: Okay. Good to hear. Thanks, Roddie. And my follow-up is just a higher level one on pricing. You've talked for a couple quarters now at least on the tightening supply demand fundamentals in the Deepwater GOM market. And that's clearly evidence for some of the dayrates you put out there with a three handle on them recently. I guess my question is, just thinking more broadly, whether it's the Deepwater Golden Triangle or other Deepwater markets around the globe. And it doesn't feel like we're seeing the same sort of pricing momentum outside of the GOM as we are seeing inside the GOM. And so, I'm just curious, if you could help frame for us outside of just ramping demand in the Gulf of Mexico, but what's driving this continued improvement in pricing that continues to come at a premium versus other markets. Is it really just a demand pull in the Gulf of Mexico, are there other factors at play that are helping driving -- that are helping to drive some of that price momentum? Thank you. Roddie Mackenzie: No. I think I would actually argue that it is not limited to the Gulf of Mexico. Look really the fixture we hadn't Brazil's very encouraging and also the fixtures getting above 300 in Norway. But in general, the Gulf of Mexico, requires a relatively high specification compared to other bases like West Africa, for example. So, you have a really good combination there where the work demand is the best equipment, and that economy is in a kind of a recovery mode, plus it happens to be amongst the lowest breakeven numbers for the operators. So, it really makes a lot of sense that when they have a good value proposition there, then they go to the market, they look to consumer rigs, and of course as they consume those higher specification assets, obviously we're paying very close attention to how many assets that are available and that allows us to move rates accordingly. Elsewhere in the world, as I had mentioned earlier, Africa and Asia are lagging a little bit really because they are feeling the significant effects of COVID are lasting a lot longer, they are than they are elsewhere. But we're super encouraged by Latin America, particularly Brazil, showing some really positive signs. And not just showing the signs anymore, as we had indicated in previous quarters, but now actually seeing the fixtures, fixture after fixture coming out of Brazil plus, nine open tenders and you're expected to book 11 rigs in the second half of the year to add to the 11 rigs we booked in the first half of the year. So that's pretty much record contracting for Petrobras. So very pleased to see that. Taylor Zurcher: In fact, it's people more in it, you talked about 50 million to 60 million, I believe if I heard you correct cash cost to reactivate from your cold stacked rigs, potentially getting up to 100 million, if you frame for us, where does pricing or contract duration need to beat it to see those reactivations progress forward from -- at least from RIG standpoint. Is it -- and I asked the question because dayrates seem to be pretty healthy right now and we're probably nearing the point where some of these reactivations are going to make sense whether for RIG or for some of your competitors. Just curious how you think you guys think about that? Mark Mey: So, Taylor, this is Mark. I think you have to look at this, especially from the perspective that the numbers that Jeremy gave you the $60 million to $100 million, that is the all-in cost. That's not just maintenance costs or the equipment costs, it includes all overhead. It includes any kind of spares or inventory that's required for that rig. So, it's a fully inclusive number. As it relates to what dayrate works for us, it depends on the duration of the contract. For a three year contract, you can clearly lower dayrate, but for a six month, nine-month contract, very difficult to get a rig activated against that. So, I think it has to come with some time, and as what he mentioned, we also see an term increase, but not really at the level where you can get consistently, three-year contracts. I would say certainly starting with a three wouldn't be a good place. Taylor Zurcher: Understood. Thanks for all the answers. Operator: All right. We'll go ahead and take our next question from Mike Sabella with Bank of America. Please go ahead. Mike Sabella: Hey, good morning, everyone. I was wondering if we could just kind of follow-up on that last line of questioning and just think of it, I guess, we think of it in terms of returns, instead of dayrates, I think it's a little more helpful. I know you all said, there's expectation for a suitable return, can you just talk about I guess what that means? I mean does that mean that you're reimbursed within this first contract or is there some other ways we should think about it? Mark Mey: Yes. So, Mike, clearly it has to pay for the reactivations, so we want to get the entire amount that we're spending on getting everything back to work back in the term of the contract. And then obviously, we also need to earn a decent return on that and we haven't prescribed where there's going to be 5% or 25%. This needs to be fair. And like I said, depending on the term of the contract, we will make the necessary adjustment to that, but we're not prescribing any kind of fixed return. Mike Sabella: That's perfect. Good to know that you expect to be paid back within the first contract. That's helpful. And then as we think about the liability management activities from here, you guys have done a pretty good job, we've seen a lot of activity over the past, I guess, nine months to a year just on this front. Can you talk to us a little bit about some of the things that come next. I know we've got the rest of the ATM program that we use, is there anything else out there that we can look to as like -- as you know guideposts that you all are expecting to accomplish this year over the next 12 months? Mark Mey: So, last year, obviously the dislocation in the market provided us an opportunity to take advantage of stability management exercises. As we look forward now over the next, call it, 12 to 18 months, what we do have on our plate is the financing for the Titan, once that rig is delivered. And then clearly with the revolver maturing in the middle of 2023, we would look to addressing that sometime in the first or second half of next year. But that’s what we have on the paper now together with the ATM. Mike Sabella: Perfect. Just a quick follow-on. At the ATM, if the markets continue to accept the equity, is there any opportunity for you guys to go above and beyond that, or we're just not really going to talk about that at this time? Mark Mey: Clearly, we have to go back to our Board for further approval on that, but we haven't discussed that yet. We want to get this done. And like I said, we have no timeframe. We could take the rest of this year or maybe three years to get to the $40 million. We're going to do it on a disciplined manner that the price we feel is straight forward about the company and our shareholders. Mike Sabella: Okay, perfect. Thanks everyone. Operator: We'll go ahead and take our next question from Ian Macpherson with Piper Sandler. Please go ahead. Ian Macpherson: Good morning. Thank you. Jeremy, you mentioned that the UK market could be at a deficit and you might even position a CAT-D rig to fill that and that was just, I wanted to clarify that given the backlog status of those rigs with Equinor. Jeremy Thigpen: Yes. Good question. Ian Macpherson: How that would work? Whether it would be a sublet or a reassignment Equinor or how that might fit? Jeremy Thigpen: No, no, good question and probably misstated that a little bit or misinterpret that a little bit. The really – Equinor rig, the CAT-D rigs are on contract with Equinor and Equinor is happy with those rigs. We're currently engaged in conversation with Equinor about the options on those rigs. And the first asset, the first CAT-D asset Equinox, I think the first CAT-D is in the 2022. So, it would have to be something after that obviously before we would consider -- a program starting after that before we consider obviously moving an asset but, but just making the comment that the UK market is heating up and if it continues to do so that could create opportunities for some of the Norwegian assets. Ian Macpherson: Okay, understood. Thanks. And then I just for my follow-up I wanted to revisit Connor’s question from the beginning of the call on your role and continued consolidation which we all know, should continue to happen. But I don't think it would be unfair to say that most of the deals that the industry has seen in a long time, haven't worked to the objectives that they set out with Songa was clearly an exception. And not that other transactions will conceived, but they mainly happen throughout a downturn that sort of overwhelmed the benefits of deal. So, do you think that just now that we are in, at the lift of an upturn that that in itself propels a better case for you to continue to consolidate or does there need to be more attributes of a target that are Songa like, which I think is rare or non-existent today in order to really tempt you into doing more? Jeremy Thigpen: Yes, good question. And to be clear, we are looking at opportunities just because we think it's incumbent upon us to do that and to see what's out there and available. But we've been very clear, it's only high specification assets in the harsh environment ultra-deepwater space, and we can't do anything to compromise the balance sheet, or liquidity position, and so that really narrows the opportunity set, maybe not much of anything. So, we're continuing to look out there and kick tires and be creative to the extent we can. But we're not going to jeopardize the balance sheet. We're not going to compromise future liquidity. Right now that is an absolute paramount importance to us. But we would encourage consolidation amongst our peers, all consolidation at this point is good consolidation, improve industry structure and get some more disciplined behavior out there amongst our competitive peers. Ian Macpherson: Absolutely. Thanks for all the color today. Appreciate it. Jeremy Thigpen: Thanks. Operator: And we’ll take our next question from Fredrik Stene with Clarksons Platou Securities. Please go ahead. Fredrik Stene: Hey, guys. Fredrik here. Thank you for answering all the previous questions, because I think most of what I wonder about has been touched already, but I wanted to use this opportunity to ask you about your cold stacked rigs just directly, because I think you said, maybe it was last quarter that you were at this point not bidding any cold stacked rigs, and then we had the Loews, for example today coming out with some new contracts on their stacked rigs. So, I was wondering, are you actively bidding, any of them at this point, have you seen those opportunities that I've talked about in terms of price points return and lease, or are you still just leaving them off your market the table. Jeremy Thigpen: Yes. At this point in time, we haven't seen any opportunities out there to present the dayrate and the term that would justify reactivation of one of our assets. So, we're being disciplined in that approach, and maybe some of our competitors have a different strategy than then we have. Roddie Mackenzie : Yes. I would say that, there are a few cases where we're betting the rigs, but the economics of those beds. Cover all the things that we mentioned previously, like paying for the full reactivation. So-- Jeremy Thigpen: --which basically means we're not going to win them. Roddie Mackenzie : Yes, it's someone else's deciding to justify a loss. Fredrik Stene: And just a quick follow-up before I jump off here. Have you gotten any pushback on those bids or are you seeing a broader aversion in the market for operators, not being willing to take a step haven't worked for some time, or have been stacked or coming out of yards, I've seen it on a few tenders. Maybe particularly out on Southeast Asia, but I was wondering, if you've been involved in such kind of restrictions in what you've been bidding for as well? Jeremy Thigpen: I don't see any restrictions in what we've been bidding for but, in Southeast Asia, for example, the activity is not yet hot enough to see an influx of rigs which influx of rigs, kind of suggests reactivation. So, since you asked about that market specifically a yes we're not there yet. But as I said before, they really got to get through the restrictions that are currently in place from COVID to see that meaningfully change. In terms of the operators willingness to entertain stacked rigs or reactivations, we see that with it with a kind of a mixed bag. It all depends on things like rig inspections that they may do or their general risk tolerance. But, yes, I think you will see some assets come back. But we cannot see a wholesale return of all the call stack assets, anytime soon. Fredrik Stene: Thank you so much. And also congrats on the great data points last week. That's all for me. Operator: And we'll take our next question from Karl Blunden with Goldman Sachs. Please go ahead. Karl Blunden: Good morning. Thanks for the time. We've heard about improving dayrates and a couple of different regions, I wonder, if you could comment on whether you'd expect to see progression to what some longer term contracts, specifically in Norway. Yes, and the reason I ask is, there's some tie in there to liability management options that you have with some of the secured bonds coming to you in 2023 for example, if any color on that would be helpful? Jeremy Thigpen: Yes. I think you in Norway specifically you're going to see. We have seen some long term programs be awarded actually some of the prominent developments. Yes, there are a few of the shorter term things in play at the moment. But we're cautiously optimistic that's migrating upwards in terms of contract duration, if we track that closely across all the different markets and you're in the space of the past kind of four or five quarters that's essentially doubling in terms of fixed terms. So, yes, expect to see longer awards for sure. I think that's probably going to be driven by your Equinor decisions on budget over the summer. But especially with the tax incentives in play, Norway is looking pretty strong for additional investment over the next couple of years. So, yes, we're positive about that. And just remains to be seen how long that goes. But, elsewhere around the world that's the kind of a big thing that we're seeing now is a lot of things are converting from your one and two wells opportunities previously there are no multiyear stuff. I think all of its multiyear stuff. Karl Blunden: So, that's very helpful. And I guess this more specifically on things like the 2023 century bonds when, when you look at those perhaps Mark, do you look at those as a use of liquidity? Or do you see that as something that you could potentially refi if the opportunity provides itself. Mark Mey: Yes, we haven't given too much thought yet call, but clearly if we can get a two, three, four-year contract on any one of those rigs, refis on the table. So, we would certainly hope to be able to do that. But we do have plans in place to deal with this through our liquidity. Karl Blunden: Thanks for the time. Appreciate it. Operator: Okay. It appears there are no further questions at this time, Mr. May I'd like to turn the conference back to you, for any additional or closing remarks. Lexington May: And thank you Madison. And thank you everyone for your participation on today's call. If you have further questions, please feel free to contact me. We look forward to talking with you again, when we report our third quarter 2021 results. Have a good day. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Transocean Ltd. (NYSE:RIG) Earnings Report Analysis
- Transocean Ltd. (NYSE:RIG) reported an EPS of -$0.09, missing the estimated EPS of $0.02.
- The company's revenue was $961.5 million, slightly below the estimated $962.7 million.
- RIG's backlog stands at $8.3 billion, indicating a positive outlook for future sales, earnings, and cash flows.
Transocean Ltd. (NYSE:RIG) is a leading offshore drilling services company, providing essential drilling services to oil and gas companies worldwide. Despite facing competition from other drilling service providers like Seadrill and Noble Corporation, RIG continues to secure its position in the market.
On February 17, 2025, RIG reported an earnings per share (EPS) of -$0.09, missing the estimated EPS of $0.02. The company's actual revenue was approximately $961.5 million, slightly below the estimated $962.7 million. Operating and maintenance expenses increased to $579 million from the previous quarter's $563 million. Despite these challenges, RIG's backlog as of February 2025 stands at $8.3 billion. This backlog is crucial for investors as it impacts the company's sales, earnings, and cash flows, improving its financial outlook.
RIG has added $175 million to its contract backlog through new deals and extensions with companies like Reliance Industries, Equinor, and Woodside Energy. This strategic move enhances RIG's global presence and provides geographical diversification, mitigating regional market risks. Reliance Industries exercised a four-well option in India, contributing to RIG's growth.
Despite a negative price-to-earnings (P/E) ratio of -4.98, RIG's price-to-sales ratio is about 0.93, indicating the stock is valued at less than one times its sales. The debt-to-equity ratio is about 0.68, showing a moderate level of debt relative to equity. The current ratio is approximately 1.64, suggesting good liquidity to cover short-term liabilities.
Transocean Ltd. (NYSE:RIG) Earnings Report Analysis
- Transocean Ltd. (NYSE:RIG) reported an EPS of -$0.09, missing the estimated EPS of $0.02.
- The company's revenue was $961.5 million, slightly below the estimated $962.7 million.
- RIG's backlog stands at $8.3 billion, indicating a positive outlook for future sales, earnings, and cash flows.
Transocean Ltd. (NYSE:RIG) is a leading offshore drilling services company, providing essential drilling services to oil and gas companies worldwide. Despite facing competition from other drilling service providers like Seadrill and Noble Corporation, RIG continues to secure its position in the market.
On February 17, 2025, RIG reported an earnings per share (EPS) of -$0.09, missing the estimated EPS of $0.02. The company's actual revenue was approximately $961.5 million, slightly below the estimated $962.7 million. Operating and maintenance expenses increased to $579 million from the previous quarter's $563 million. Despite these challenges, RIG's backlog as of February 2025 stands at $8.3 billion. This backlog is crucial for investors as it impacts the company's sales, earnings, and cash flows, improving its financial outlook.
RIG has added $175 million to its contract backlog through new deals and extensions with companies like Reliance Industries, Equinor, and Woodside Energy. This strategic move enhances RIG's global presence and provides geographical diversification, mitigating regional market risks. Reliance Industries exercised a four-well option in India, contributing to RIG's growth.
Despite a negative price-to-earnings (P/E) ratio of -4.98, RIG's price-to-sales ratio is about 0.93, indicating the stock is valued at less than one times its sales. The debt-to-equity ratio is about 0.68, showing a moderate level of debt relative to equity. The current ratio is approximately 1.64, suggesting good liquidity to cover short-term liabilities.
Transocean Ltd. (NYSE:RIG) Faces Legal Challenges Amid Financial Struggles
- Transocean Ltd. (NYSE:RIG) is set to release its quarterly earnings on February 17, 2025, with an estimated earnings per share of $0.02 and projected revenue of $962.3 million.
- The company is currently involved in a class action lawsuit alleging securities fraud related to false statements about its oil rigs and overstated asset valuations.
- Transocean's financial metrics reveal a negative price-to-earnings (P/E) ratio of -5.12 and a moderate debt-to-equity ratio of 0.68, indicating financial challenges and a balanced level of debt.
Transocean Ltd. (NYSE:RIG) is a leading offshore drilling contractor, providing services for oil and gas wells. The company operates a fleet of mobile offshore drilling units, including ultra-deepwater, deepwater, and midwater floaters. Transocean competes with other major players in the industry, such as Seadrill and Noble Corporation. On February 17, 2025, RIG will release its quarterly earnings, with Wall Street estimating an earnings per share of $0.02 and projected revenue of $962.3 million.
Despite these projections, Transocean faces significant legal challenges. A class action lawsuit has been filed against the company, alleging securities fraud. The lawsuit claims that Transocean made false statements or concealed information about its oil rigs, Discoverer Inspiration and Development Driller III, and overstated asset valuations. This legal action covers the period from May 1, 2023, to September 2, 2024, and aims to recover losses for affected shareholders.
The lawsuit is currently pending in the United States District Court for the Southern District of New York. Investors who purchased Transocean's securities during the specified period have until February 24, 2025, to apply for lead plaintiff status. Kahn Swick & Foti, LLC, along with former Louisiana Attorney General Charles C. Foti, Jr., is alerting investors about this deadline. Shareholders with losses exceeding $100,000 are particularly encouraged to explore their legal options.
Transocean's financial metrics reflect its current challenges. The company has a negative price-to-earnings (P/E) ratio of -5.12, indicating ongoing losses. Its price-to-sales ratio is 0.96, suggesting the stock is valued at less than one times its sales. The enterprise value to sales ratio is 2.82, and the enterprise value to operating cash flow ratio is 27.55, highlighting the company's valuation relative to sales and cash flow.
Despite these challenges, Transocean maintains a moderate debt-to-equity ratio of 0.68, indicating a balanced level of debt compared to equity. The current ratio of 1.64 suggests that the company has sufficient liquidity to cover its short-term liabilities. However, the earnings yield of -19.53% underscores the financial difficulties the company is facing.
Transocean Ltd. (NYSE:RIG) Faces Legal Challenges Amid Financial Struggles
- Transocean Ltd. (NYSE:RIG) is set to release its quarterly earnings on February 17, 2025, with an estimated earnings per share of $0.02 and projected revenue of $962.3 million.
- The company is currently involved in a class action lawsuit alleging securities fraud related to false statements about its oil rigs and overstated asset valuations.
- Transocean's financial metrics reveal a negative price-to-earnings (P/E) ratio of -5.12 and a moderate debt-to-equity ratio of 0.68, indicating financial challenges and a balanced level of debt.
Transocean Ltd. (NYSE:RIG) is a leading offshore drilling contractor, providing services for oil and gas wells. The company operates a fleet of mobile offshore drilling units, including ultra-deepwater, deepwater, and midwater floaters. Transocean competes with other major players in the industry, such as Seadrill and Noble Corporation. On February 17, 2025, RIG will release its quarterly earnings, with Wall Street estimating an earnings per share of $0.02 and projected revenue of $962.3 million.
Despite these projections, Transocean faces significant legal challenges. A class action lawsuit has been filed against the company, alleging securities fraud. The lawsuit claims that Transocean made false statements or concealed information about its oil rigs, Discoverer Inspiration and Development Driller III, and overstated asset valuations. This legal action covers the period from May 1, 2023, to September 2, 2024, and aims to recover losses for affected shareholders.
The lawsuit is currently pending in the United States District Court for the Southern District of New York. Investors who purchased Transocean's securities during the specified period have until February 24, 2025, to apply for lead plaintiff status. Kahn Swick & Foti, LLC, along with former Louisiana Attorney General Charles C. Foti, Jr., is alerting investors about this deadline. Shareholders with losses exceeding $100,000 are particularly encouraged to explore their legal options.
Transocean's financial metrics reflect its current challenges. The company has a negative price-to-earnings (P/E) ratio of -5.12, indicating ongoing losses. Its price-to-sales ratio is 0.96, suggesting the stock is valued at less than one times its sales. The enterprise value to sales ratio is 2.82, and the enterprise value to operating cash flow ratio is 27.55, highlighting the company's valuation relative to sales and cash flow.
Despite these challenges, Transocean maintains a moderate debt-to-equity ratio of 0.68, indicating a balanced level of debt compared to equity. The current ratio of 1.64 suggests that the company has sufficient liquidity to cover its short-term liabilities. However, the earnings yield of -19.53% underscores the financial difficulties the company is facing.
Citi Downgrades Transocean to Neutral, Citing Downside Risk to 2025 EBITDA Forecasts
Citi analysts downgraded Transocean (NYSE:RIG) to Neutral from Buy, lowering the price target on the stock to $4.50 from $7.50.
The downgrade reflects the challenges faced by offshore drillers, as the outlook for energy investors remains uncertain. While a modest increase in demand for rigs by 2026 could lead to free cash flow (FCF) yields of over 20%, the analysts' updated forecast—incorporating fewer rig reactivations, more downtime in 2025, and slightly lower rates for 6th-generation floaters—suggests downside risks to 2025 EBITDA expectations. However, the analysts noted that recent market pullbacks and investor conversations indicate that some of these concerns may already be factored into the current valuation.
As part of a broader realignment, the analysts shifted their preference to Seadrill (SDRL), upgrading it to Buy with a target price of $52, based on the company’s strong FCF yield potential and expected contract renewals for its Brazilian rigs. Meanwhile, Transocean's valuation, although bolstered by strong contracts, remains at a premium under more conservative assumptions, and the analysts speculate that Transocean could emerge as a potential suitor for Seadrill, contributing to the downgrade.
Citi Downgrades Transocean to Neutral, Citing Downside Risk to 2025 EBITDA Forecasts
Citi analysts downgraded Transocean (NYSE:RIG) to Neutral from Buy, lowering the price target on the stock to $4.50 from $7.50.
The downgrade reflects the challenges faced by offshore drillers, as the outlook for energy investors remains uncertain. While a modest increase in demand for rigs by 2026 could lead to free cash flow (FCF) yields of over 20%, the analysts' updated forecast—incorporating fewer rig reactivations, more downtime in 2025, and slightly lower rates for 6th-generation floaters—suggests downside risks to 2025 EBITDA expectations. However, the analysts noted that recent market pullbacks and investor conversations indicate that some of these concerns may already be factored into the current valuation.
As part of a broader realignment, the analysts shifted their preference to Seadrill (SDRL), upgrading it to Buy with a target price of $52, based on the company’s strong FCF yield potential and expected contract renewals for its Brazilian rigs. Meanwhile, Transocean's valuation, although bolstered by strong contracts, remains at a premium under more conservative assumptions, and the analysts speculate that Transocean could emerge as a potential suitor for Seadrill, contributing to the downgrade.
