Transocean Preview: Margins In Focus As Utilizations Expected To Remain Strong

Feb 25 2014, 1:03pm CST | by

Transocean is scheduled to announce its Q4 2013 earnings on February 26, reporting on a quarter that saw reasonably strong drilling activity worldwide. During Q3 2013, the company’s revenues increased by around 5% year-over-year to $2.56 billion, while adjusted income from continuing operations before taxes rose by around 4% to $618 million. For Q4, we expect the company’s revenues to be driven by strong utilization rates as well as the relatively smooth operation of the company’s fleet. However, we will be closely watching the company’s progress in improving operating margins.

Trefis will be revisiting its $53 price estimate for Transocean following the company’s earnings release.

See Our Complete Analysis For Transocean Here

Operating Margins Are A Key Factor To Watch

Transocean is focused on the high end of the offshore drilling market, with its fleet geared towards high-specification floaters such as ultra-deepwater, deepwater and harsh environment rigs since they typically have the highest day rates. The company has been seeing relatively strong operating metrics as well. Utilization rates have largely stood at above 80% while revenue efficiency (a measure of the actual revenues a rig earns when contracted versus its maximum potential revenues) has also held up at over 93% over the last few quarters. However, the company’s profit margins have been something of a concern, especially when compared to competitors such as Seadrill. This is primarily due to the company’s higher maintenance costs and its relatively older fleet. Transocean’s typical rigs are roughly 9.5 years old, compared to Sea Drill and Ensco, whose rigs have an average age of less than four years.
/>

Transocean has been taking steps to improve its profitability by scaling down its shore-based support infrastructure following the sale of its jack-up rig fleet. The company has also been streamlining and consolidating some business functions while eliminating some of its non-core operations. Transocean says that these initiatives should help raise operating income by around $800 million by the end of FY 2015. During the third quarter, the company’s operating margins stood at roughly 29% compared to around 33% during the same period last year, due to higher operation and maintenance costs. We believe that the company’s ability to improve its margins will be a key catalyst for the stock in the near term, considering that revenues could come under pressure given the looming oversupply of deepwater rigs in the market (see Why Transocean’s Stock Has Been Trending Lower).

See More at Trefis | View Interactive S&P Capital IQ Analyses (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Complete fossil of small dinosaur found
Seoul, Nov 24 (IANS/EFE) South Korean paleontologists have found a complete fossil of a small dinosaur in rare condition, the first such discovery of its kind in the country, according to the National Research Institute of Cultural Heritage in Seoul.
 
 
Oman considers remittance tax on expats
Dubai, Nov 24 (IANS) The proposal for a two percent levy on the billions of rials that expatriates send home every year has been approved by Oman's Majlis al-Shura, or the lower house of the council of Oman, to overcome a budget deficit due to drop in oil prices, a media report said.
 
 
Russia to lose $40 bn a year due to sanctions: Minister
Moscow, Nov 24 (IANS/EFE) Western sanctions against Russia triggered by its actions in Ukraine will cost the country's economy $40 billion a year, Russian Finance Minister Anton Siluanov said Monday.
 
 
Excess of a protein may trigger schizophrenia
New York, Nov 24 (IANS) Overabundance of a protein in the brain cells during brain development may cause abnormalities in its structure and lead to schizophrenia, says a study.
 
 
 

Latest from the Network

Hamilton admits hardly sleeping the night before
Abu Dhabi, Nov 24 (IANS/CMC) Newly crowned Formula 1 World champion Lewis Hamilton has revealed he hardly slept the night before the season-ending Abu Dhabi Grand Prix which he eventually won to clinch his second...
Read more on Sport Balla
 
Real Madrid to play in Australian tournament
Melbourne, Nov 24 (IANS) Real Madrid, which boasts the most expensive squad in world football, have been announced as one of three teams to compete in the International Champions Cup in Melbourne in July. The...
Read more on Sport Balla
 
Cruzeiro win Brazil Serie A title
Belo Horizonte (Brazil), Nov 24 (IANS) Cruzeiro have clinched their second consecutive Brazilian Serie A title with a 2-1 victory over Goias. Everton Ribeiro struck the winner at the Mineirao stadium Sunday after...
Read more on Sport Balla
 
Honours shared in Milan derby
Rome, Nov 24 (IANS) Inter Milan have played out a 1-1 draw against crosstown rivals AC Milan in a sellout Serie A game. Jeremy Menez gave AC Milan a lead at halftime but Joel Obi equalised for Inter shortly after the...
Read more on Sport Balla
 
IOC chief condemns Afghan bombing
Lausanne, Nov 24 (IANS) International Olympic Committee President Thomas Bach condemned the suicide bombing at a volleyball tournament in Afghanistan. The lone bomber detonated explosives Sunday during a local...
Read more on Sport Balla
 
Marseille tops French league
Paris, Nov 24 (IANS) Marseille have climbed to the top of the French league after rallying to beat Bordeaux 3-1. With the victory, they now enjoy a one-point lead over Paris Saint-Germain. Bordeaux striker Thomas...
Read more on Sport Balla
 
New crew aboard Russian spaceship reach ISS
Washington, Nov 24 (IANS) Three new crew members from the US, Russia and Italy arrived Monday at the International Space Station (ISS) on board a Russian spaceship. Terry Virts of NASA, Soyuz Commander Anton...
Read more on Business Balla
 
Sears plans for big Black Friday 2014
Sears is looking foward to cashing in big time for the upcoming Black Friday 2014 shopping holiday on Novermber 28th. Members of Sears have seen their Black Friday specials start one week early and the company has...
Read more on Black Friday Countdown
 
Apple gears up for Black Friday
Black Friday is fast approaching and one company that plans on seeing a sales increase is Apple. Apple has announced that they will have discounted prices for the upcoming buying holiday and one product they plan on...
Read more on Black Friday Countdown
 
Thousands protest in Chile in favour of new constitution
Santiago, Nov 24 (IANS/EFE) Several thousand people took to the streets of Santiago and other Chilean cities to demand a Constitutional Assembly as a means to provide the country with a new constitution, as was...
Read more on Politics Balla