Offshore drilling giant Transocean Ltd. RIG has entered into a deal with Husky Oil Operations Limited for its semisubmersible rig Henry Goodrich.
Per the agreement, Husky Oil will likely use the rig – capable of working in a harsh environment − for two years off the coast of Canada. The rig – anticipated to be operational by the second quarter of 2016 – is likely to see a dayrate of $275,000. Most importantly, the award will add $200 million to Transocean’s backlog.
It is to be noted that the rig’s current dayrate is lower that its previous rate which was in the range of $347,000–$476,000. The company added that its contract backlog as of Dec 6, 2015 was $16.8 billion.
Switzerland-based Transocean is the world’s largest offshore drilling contractor and leading provider of drilling management services. With less oil being discovered on land and companies having to dig ever deeper to get to their reserves, Transocean is poised to benefit from a market with robust multi-year demand trends, given its technologically advanced and versatile drilling fleet. In particular, Transocean is the industry leader in deep sea drilling. The company’s mobile offshore drilling fleet is capable of functioning in the most challenging environment like the North Sea.
The positives are reflected in the company’s better-than-expected third-quarter 2015 results. Earnings per share (excluding special items) came in at 87 cents, which breezed past the Zacks Consensus Estimate of 67 cents. Moreover, quarterly total revenue of $1,608 million beat the Zacks Consensus Estimate of $1,588 million.
Transocean currently carries a Zacks Rank #2 (Buy), implying that the stock will outperform the broader U.S. equity market over the next one to three months.
Some other energy players that warrant a look are Energy Transfer Equity, L.P. ETE, Ferrellgas Partners LP FGP and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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