Transocean’s Fleet Status: Not Enough Jobs For A Driller Of This Size – Seeking Alpha


Development Driller III

Transocean (RIG) is no longer the biggest driller following Ensco-Rowan merger that led to the creation of EnscoRowan (ESV), but its floater fleet is very substantial and can surely serve as a gauge for general floater market health. Transocean’s fleet status report is out, and it contains a rather low number of new jobs for a driller of this size. Without further ado, let’s get to the news:

  1. Semi-sub Development Driller III will work six more months offshore Equatorial Guinea as the customer exercised an option. The rig is now expected to work until February 2020. The dayrate is $192,000.
  2. Semi-sub Leiv Eriksson will drill one more well in the Norwegian North Sea. As expected, the rig keeps getting additional work from Lundin. Harsh-environment floaters are in demand, and I expect that the rig will work up to January 2020, having finished all options with Lundin and the contract with ConocoPhillips (COP).
  3. Drillship Ocean Rig Poseidon will drill two more wells offshore Angola, keeping the rig busy until July 2019.
  4. Semi-sub Transocean Leader will work for Premier Oil in UK North Sea from March 2020 to June 2020 at an undisclosed dayrate. Currently, the rig has a gap between this contract and the current one, which ends in October 2019.
  5. Drillship Ocean Rig Mykonos got a 550-day contract and an option of 815 days in Brazil for Petrobras (PBR). This contract has been previously made public – I discussed it in this article. The fleet status indicates that the firm portion of the contract is from November 2019 to May 2021 at a dayrate of $215,000.
  6. Drillship Ocean Rig Corcovado got a 629-day contract plus an option of 680 days in Brazil. Interestingly, the fleet status indicates the same duration – from November 2019 to May 2021. Something is clearly wrong here: even if we assume that the rig starts working at November 1, 2019, and works through May 2021, becoming free on June 1, 2021, that’s a distance of 578 days. However, both the original report about Corcovado/Mykonos contracts and the current Transocean’s press release indicate a contract duration of 629 days. Perhaps, this will be clarified during the conference call when the company reports Q1 2019 results.
  7. Semi-sub Deepwater Nautilus got a six-well offshore Malaysia. The rig will work for Shell (NYSE:RDS.A) (NYSE:RDS.B) from May 2019 to January 2020 at an undisclosed dayrate. This contract comes in continuation of the previous contract with Shell in Brunei which ended in March 2019.
  8. Drillship Deepwater Asgard got a two-well contract in U.S. Gulf of Mexico. The rig will work for Murphy Oil (MUR) from May 2019 to August 2019 at an undisclosed dayrate.
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If I had to guess what the company will say about the contract performance shown in the April fleet status report, I’d bet on something like “We are carefully evaluating opportunities and do not want to commit rigs at current dayrates for too long”. However, if we look at the current number of modern warm and cold stacked drillships, Transocean theoretically has 8 rigs to offer (Deepwater Asgard, Ocean Rig Corcovado, Ocean Rig Mykonos are waiting to start jobs):

Source: Bassoe Offshore

Also, Transocean will have to find work for newbuild drillships JSPL Ultra-Deepwater Drillship TBN1, Ocean Rig Crete, and Ocean Rig Santorini. With a theoretical capacity of 11 drillships (this number includes cold stacked ones which have been acquired as part of Ocean Rig fleet), it does not look like the company really has to hold off its rigs trying to wait for dayrates to pick up – it certainly wouldn’t hurt to put some more floaters to work after the company spent precious resources to acquire Ocean Rig.

This report may suggest that oil companies are in no big rush to secure as many floaters as they can at current low dayrates. I continue to expect that we’ll see more news about contract awards in the second half of the year when oil companies will likely be trying to secure rigs for their plans for the beginning of the next decade. However, the year 2019 is starting on a modest note – the first four months of this year did not bring as many contracts as industry investors would like.

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Transocean has material leverage to the fluctuations in floater demand and dayrates due to the size of its fleet, so such news is not great for the company, at least in the near term. Even with Brent oil (BNO) above $70, Transocean shares failed to settle above the resistance level around $9.00 level, and this fleet status report is no help on this front.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any 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.

Additional disclosure: I may trade any of the above-mentioned stocks.




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