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Transocean’s Take on Offshore Drilling’s Outlook

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Market outlook

In its 4Q16 conference call, Transocean (RIG) shared its outlook for the offshore drilling market. The company’s view of the industry could also shed some light on the outlook for offshore peers (OIH) Seadrill (SDRL), Diamond Offshore (DO), Rowan Companies (RDC), Noble (NE), Atwood Oceanics (ATW), and Ocean Rig (ORIG).

Some of the key points Transocean shared are as follows.

  • The current oil price of $50 per barrel is more encouraging than the $26 per barrel recorded in February 2016. This improvement brought an uptick in inquiries by national oil companies and IOCs. However, Transocean believes the recent uptick is unlikely to significantly impact the near-term outlook of the offshore drilling industry.
  • 2017 will the third consecutive year of spending cuts and underinvestment in core assets. For 2017, Transocean believes IOCs won’t sanction new projects as their focus will remain on preserving liquidity.
  • 2018 looks encouraging. Assuming oil prices continue to rise as expected, Transocean believes customers will have improved balance sheets by 2018 and IOCs will have sufficient liquidity to sanction projects.
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CEO statement

In Transocean’s 4Q16 earnings release, Transocean’s CEO Jeremy Thigpen stated, “Improving market fundamentals along with a steady flow of customer inquiries are increasing our confidence that the offshore drilling market trough is near.”

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