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Analyzing Transocean’s Growth ahead of Earnings: 4 Key Drivers

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Transocean’s revenue

All the rig types Transocean (RIG) operates—ultra-deepwater, deepwater, harsh-environment, midwater, and jackup—recorded lower revenues in the past year. Transocean’s Deepwater Floaters and Ultra Deepwater Floaters segment revenues have suffered the most during this period. Revenues in these two segments fell 42% and 32%, respectively, from fiscal 3Q14 to 3Q15. Together, these two segments accounted for ~58% of Transocean’s fiscal 3Q15 revenues.

Quarter-over-quarter, however, Transocean’s revenue decline has decelerated in all segments. The Jackups segment lost 9% from fiscal 2Q15 to 3Q15. This fall was the lowest drop among the segments. Revenues generated from the Ultra Deepwater Floaters fell 10%.

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In fiscal 3Q15, Transocean recorded total revenues of ~$1.6 billion, down 29% from $2.3 billion in 3Q14. In comparison, SeaDrill Limited (SDRL), Transocean’s peer, recorded $985 million in revenue in fiscal 3Q15—24% lower than a year ago. Transocean is 0.04% of the iShares S&P 500 Value ETF (IVE). The energy sector accounts for 12% of IVE.

Analyzing Transocean’s growth drivers

  1. severe dayrate cuts in Transocean’s harsh environment floaters and ultra deepwater floaters
  2. lower fleet utilization
  3. favorable income tax impact due to jurisdictional and operational structure changes for certain rigs
  4. strong capex in fiscal 3Q15 related to the company’s newbuild program and final shipyard payment for the Deepwater Thalassa, -an ultra-deepwater floater

Transocean’s contracts in F4Q15

In December 2015, Transocean’s harsh-environment semisubmersible the Henry Goodrich received a two-year contract for an estimated contract backlog of ~$200 million. Also in December 2015, Transocean’s one ultra-deepwater rig contract and a harsh environment semisubmersible contract terminated early.

Next, we’ll discuss what Transocean’s share price movements can show you.

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