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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...

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27 weeks ago

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.
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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).

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Source: Forbes Business

 
Update
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4 days ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

5 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

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