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Ocean Rig’s Backlog and Contract Status

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Ocean Rig’s backlog

A company’s backlog is a helpful indicator of its future revenues. Ocean Rig (ORIG) had a backlog of $1.5 billion on February 22, 2017, compared to its backlog of $1.8 billion in December 2016.

The ratio of the company’s backlog to its TTM (trailing 12-month) revenues fell rapidly and stands at 90%, compared to 102% at the end of the previous quarter.

The steep fall is a cause for concern and indicates that Ocean Rig is relying on older contracts for revenues. It isn’t replenishing its backlog with new contracts as much as it’s utilizing its backlog. The steep fall also tells us that the company could see more steep falls in revenues going forward.

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Contract status

Of the ten rigs that Ocean Rig currently owns, excluding newbuilds in the pipeline, only five rigs are contracted. Of these five rigs,contracts on two rigs are expected to roll off in 2017 and other two should roll off in 2018. The uncontracted rigs are either cold stacked or in the process of cold stacking.

Contract update

In February 2017, Ocean Rig reached an agreement with its client Premier Oil and Noble Energy to settle disputed invoices. Ocean Rig should receive a total payment of $25 million from this settlement.

Also, the company reached an agreement with ConocoPhillips to terminate the contract of the Ocean Rig Athena. ConocoPhillips plans to pay the termination fee.

Peer backlogs

Ocean Rig’s backlog-to-TTM ratio stands at 90%. Here’s where other offshore drilling (OIH) companies’ ratios stand:

  • Transocean (RIG): backlog to trailing 12-month revenue ratio is 114%
  • Diamond Offshore (DO): backlog to trailing 12-month revenue ratio is 236%
  • Noble Corp (NE): backlog to trailing 12-month revenue ratio is 143%
  • Pacific Drilling (PACD): backlog to trailing 12-month revenue ratio is 74%.
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