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What’s Transocean’s Capex and Liquidity Forecast through 2018?

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Aug. 9 2016, Updated 10:08 a.m. ET

Cash flow

Operating cash flow represents the cash flows from the core operations of a company. In 2Q16, Transocean (RIG) had cash flow from operations of $207 million, which was lower than the $631 million it had been in the previous quarter.

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Capital expenditure

Transocean’s capex totaled $458 million in 2Q16. This was mostly related to the payments toward newbuilds. The company expects its capex to be $600 million in the second half of 2016 and the maintenance capex to be $50 million. Going forward in 2017, the company expects its capex to total $600 million. Transocean has reduced this forecast by $25 million from the forecast it gave in the first quarter. Further in 2018, Transocean expects its capex to be $375 million.

Free cash flow

Transocean recorded $1.4 billion in free cash flow in 2015. In the first quarter, as well, the company recorded a positive free cash flow but a negative cash flow of $251 million in the second quarter. Even after a heavy capex requirement in 2016 and negative free cash in the second quarter, Wall Street analysts estimate a positive free cash flow of $101 million for the full year of 2016.

In 2015, offshore drillers (XLE) Seadrill (SDRL), Noble (NE), and Rowan Companies (RDC) posted positive free cash flow, but Diamond Offshore (DO) posted negative free cash flow.

Liquidity forecast

Based on Transocean’s current forecasts, its liquidity will be in the range of $3 billion–$3.5 billion by December 31, 2017. The company reduced its forecast from the one given in the first quarter conference call. At that time, Transocean forecasted its liquidity at the end of the year to be $4 billion–$5 billion.

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