Transocean’s Contract Negotiations and Backlog

Transocean’s backlog

As of October 2015, Transocean (RIG) had a backlog of $16.9 billion compared to $18.6 billion at the end of 2Q15. Backlog helps us gauge how and where a company’s future revenue may stand. Transocean’s backlog to TTM (trailing 12-month) revenue ratio fell from 230% at the start of 2015 to 217% as of October 2015. 

Transocean’s Contract Negotiations and Backlog

Contracted rigs and backlog

  • Of the total backlog of $16.9 billion, 85%, or $14.4 billion, is for ultra-deepwater floaters. Transocean has 17 of its 27 ultra-deepwater floaters contracted through the end of 2015.
  • Harsh environment backlog stands at $1.1 billion, which is almost 7% of the total backlog. The company has four out of the seven harsh environment floaters contracted through the end of 2015.
  • Similarly, total deepwater and mid-water represent 4% of the total backlog. Eleven out of 18 of the company’s deepwater and mid-water floaters are contracted through the end of 2015.
  • In the jackup segment, seven of its ten jackups are contracted through the end of 2015. This segment contributes 4% of the total backlog.

Comparing backlog with peers 

Transocean’s backlog to TTM revenue ratio of 217% is similar to Rowan Companies (RDC) and Diamond Offshore (DO) at 210% and 228%, respectively. The company has a higher ratio than other offshore drillers (IYE) such as Pacific Drilling (PACD), Seadrill (SDRL), and Ensco (ESV), which have ratios of 164%, 153%, and 160%, respectively.

Contract negotiations

Transocean has stated that it has successfully renegotiated contracts with Petrobras. According to the negotiations, contracts on Deepwater Navigator will be terminated from December 31, 2015, and the contract on Deepwater Driller will be terminated from June 30, 2016. In exchange, the company received an additional 747 days of term at $275,000 per day for Sedco 706, which is a second-generation deepwater rig that was upgraded in 2007. This exchange has added $164 million net contract backlog.