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1. Company Snapshot

1.a. Company Description

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide.It contracts its mobile offshore drilling rigs, related equipment, and work crews to drill oil and gas wells.As of February 14, 2022, the company had partial ownership interests in and operated a fleet of 37 mobile offshore drilling units, including 27 ultra-deep water and 10 harsh environment floaters.


It serves integrated energy companies, government-owned or government-controlled oil companies, and other independent energy companies.The company was founded in 1926 and is based in Steinhausen, Switzerland.

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1.b. Last Insights on RIG

Transocean Ltd.'s recent performance has been positively driven by several factors. The company secured new contracts, including an $89 million backlog contract with new rig options, boosting its global presence in Brazil, Norway, and Romania. Additionally, Transocean announced exercised options totaling $89 million, representing a significant increase in firm contract backlog. Furthermore, Creative Planning increased its stake in the company by 89.6%, now owning 1,072,043 shares. Analysts have given Transocean a consensus rating of "Hold" with three firms issuing a buy rating.

1.c. Company Highlights

2. Transocean's Q3 Earnings: A Strong Performance Amidst a Challenging Market

Transocean reported a robust third quarter, with contract drilling revenues reaching $1.03 billion, slightly above analyst estimates. The company's average daily revenue was approximately $462,000. Earnings per share (EPS) came in at $0.06, beating estimates of $0.04. Operating and maintenance expense was $584 million, below the guidance range, while capital expenditures for the quarter were $11 million, also below expectations. The company's strong financial performance was driven by its focus on delivering superior operational performance to its customers.

Publication Date: Nov -02

📋 Highlights
  • Strong Q3 Performance: Contract drilling revenues reached $1.03 billion with average daily revenue of $462,000, driven by operational efficiency.
  • Cost Reduction & Liquidity: Operating and maintenance expenses ($584 million) and capital expenditures ($11 million) both fell below guidance, with $1.8 billion total liquidity reported.
  • Future Market Growth: Anticipated 10% growth in contracted floaters over 18 months, with 23 years of firm work in Brazil (6 rigs) expected from Petrobras and Shell tenders.
  • 2026-2027 Outlook: Forecasted contract drilling revenue of $3.8–$3.95 billion in 2026, with ultra-deepwater utilization projected to exceed 90% by 2027 as exploration demand rises.
  • Debt Reduction Progress: Remaining debt of $5.9 billion (net of $80 million payments) reflects deleveraging efforts, with $1.4 billion liquidity expected by year-end and no equity raises anticipated.

Operational Highlights

The company's operational performance was a key driver of its financial results. Transocean's fleet utilization and day rates were key contributors to its revenue growth. According to Keelan Adamson, "We expect the number of contracted floaters to grow by approximately 10% in the next 18 months," indicating a positive outlook for the company's operational performance. The company is also seeing a steady increase in contract awards, with 23 rig years awarded in Brazil alone.

Outlook and Guidance

For the fourth quarter, Transocean expects contract drilling revenues to be between $1.03 billion and $1.05 billion, based on an average fleet-wide midpoint revenue efficiency of 96.5%. The company expects O&M expense to be within a range of approximately $595 million to $615 million. Looking ahead to 2026, Transocean forecasts contract drilling revenue to be between $3.8 billion and $3.95 billion, with ultra-deepwater fleet utilization expected to bridge over 90% as the year progresses into 2027.

Valuation and Growth Prospects

Analysts estimate next year's revenue growth at -2.3%, indicating a challenging market environment. However, Transocean's strong operational performance and improving balance sheet position the company for long-term success. The company's current valuation metrics, including a P/E Ratio of -1.19, P/B Ratio of 0.43, and EV/EBITDA of -8.68, suggest that the market is pricing in significant challenges. However, the company's Free Cash Flow Yield of 13.9% indicates a potentially attractive return for investors.

3. NewsRoom

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Still Holding Transocean Stock: Here's Why That's Justified

Dec -01

Source: zacks.com

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Transocean Ltd. (NYSE:RIG) Given Average Rating of “Hold” by Analysts

Nov -29

Source: defenseworld.net

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First Look: Campbell Soup fallout, Alphabet AI strength, Nvidia rebuttal

Nov -26

Source: gurufocus.com

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Fund Takes Bold New Position: Is Transocean Stock a Good Buy?

Nov -25

Source: fool.com

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Transocean Secures $89M Backlog Contract With New Rig Options

Nov -24

Source: zacks.com

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Creative Planning Has $2.78 Million Stock Holdings in Transocean Ltd. $RIG

Nov -24

Source: defenseworld.net

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Bank of New York Mellon Corp Decreases Position in Transocean Ltd. $RIG

Nov -21

Source: defenseworld.net

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Transocean Ltd. Announces Exercised Options Totaling $89 Million

Nov -18

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (12.54%)

6. Segments

Ultra-deepwater Floaters

Expected Growth: 12%

Transocean's ultra-deepwater floaters' 12% growth driven by increasing offshore drilling demand, rising oil prices, and growing exploration activities in deepwater regions. Additionally, the company's strategic fleet management, cost reductions, and high-specification rig upgrades contribute to its growth momentum.

Harsh Environment Floaters

Expected Growth: 14%

Transocean's Harsh Environment Floaters segment growth is driven by increasing demand for deepwater drilling, rising oil prices, and growing exploration activities in harsh environments. Additionally, the company's strategic fleet upgrades, high-specification rigs, and strong operational performance contribute to its 14% growth.

7. Detailed Products

Deepwater Drilling

Transocean provides deepwater drilling services for oil and gas exploration and production companies, utilizing its fleet of deepwater drilling rigs.

Harsh Environment Drilling

Transocean offers harsh environment drilling services for operations in extreme weather conditions, such as Arctic and sub-Arctic regions.

Midwater Drilling

Transocean provides midwater drilling services for oil and gas exploration and production companies, utilizing its fleet of midwater drilling rigs.

Drilling Management Services

Transocean offers drilling management services, including project management, well planning, and operational support, to oil and gas companies.

Well Intervention Services

Transocean provides well intervention services, including coiled tubing, wireline, and pumping services, to oil and gas companies.

8. Transocean Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Transocean Ltd. is medium due to the availability of alternative drilling services and equipment from other companies.

Bargaining Power Of Customers

The bargaining power of customers for Transocean Ltd. is low due to the company's strong market position and the lack of alternative drilling services.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Transocean Ltd. is medium due to the availability of alternative suppliers of drilling equipment and services.

Threat Of New Entrants

The threat of new entrants for Transocean Ltd. is low due to the high barriers to entry in the offshore drilling industry, including high capital costs and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Transocean Ltd. is high due to the competitive nature of the offshore drilling industry, with many established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 41.58%
Debt Cost 8.60%
Equity Weight 58.42%
Equity Cost 18.06%
WACC 14.12%
Leverage 71.18%

11. Quality Control: Transocean Ltd. passed 0 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Saipem

A-Score: 5.2/10

Value: 8.2

Growth: 3.2

Quality: 4.2

Yield: 5.0

Momentum: 7.0

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
TechnipFMC

A-Score: 4.9/10

Value: 4.8

Growth: 5.1

Quality: 7.1

Yield: 0.6

Momentum: 8.5

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Seadrill

A-Score: 4.2/10

Value: 6.9

Growth: 7.0

Quality: 5.2

Yield: 0.0

Momentum: 4.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Shelf Drilling

A-Score: 3.8/10

Value: 8.2

Growth: 4.9

Quality: 5.5

Yield: 0.0

Momentum: 4.0

Volatility: 0.0

1-Year Total Return ->

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Stock-Card
Neste

A-Score: 3.5/10

Value: 4.8

Growth: 3.2

Quality: 1.2

Yield: 5.6

Momentum: 4.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Transocean

A-Score: 2.9/10

Value: 8.9

Growth: 2.8

Quality: 3.2

Yield: 0.0

Momentum: 2.0

Volatility: 0.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

4.44$

Current Price

4.44$

Potential

-0.00%

Expected Cash-Flows