2Q17 cash flow
The operating cash flow represents cash flows from a company’s core operations. In 2Q17, Transocean’s (RIG) cash flow from operations rose to $319 million from $184 million in the previous quarter.
Transocean’s capex totaled $136 million in 2Q17—it was primarily related to Transocean’s newbuild drillships. The capex was higher than $122 million in the previous quarter.
The company expects its capex for the third quarter to be $150 million, which will be primarily related to the completion and mobilization of newbuild Deepwater Pontus, the construction of Deepwater Poseidon, and an upgrade for its Discovery rig.
Going forward, Transocean expects its fiscal 2017 capex to be $500 million out of which $420 million is related to newbuild drillships. In 2018 and 2019, the company expects its capex to be $165 million and $190 million, respectively.
Financial transactions and liquidity
In the second quarter, Transocean repurchased debt (near-term maturities) in the open market totaling $131 million. In mid-June, Transocean conducted a successful cash tender after repurchasing existing notes totaling $1.2 billion. It’s also focused on near-term maturities between 2017 and 2021.
After these transactions, the company ended the quarter with $5.5 billion of liquidity. Transocean reduced its near-term debt by $1 billion. Over the past year, Transocean reduced its net debt by 20%.
Moody’s revised Transocean’s outlook from “stable” to “negative.” Moody’s gave a negative outlook because it doesn’t view the offshore drilling industry’s recovery, especially for the Deepwater segment, until at least 2019. As a result, Transocean’s cash flow and credit metrics will likely fall more. Even though Transocean has an excellent liquidity position, its revolving credit facility will mature in mid-2019. There’s still concern about the size and structure of Transocean’s revolving credit facility after re-organization. Moody’s (MCO) also downgraded two other offshore drillers (IYE)—Rowan Companies (RDC) and Diamond Offshore (DO).