|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Contest Submission Update: Transocean
Posted by: Chandan Dubey (IP Logged)
Date: November 11, 2012 11:41AM
Approximately a year ago, I submitted a value idea “Transocean: A Driller with Significant Margin of Safety.” At the time the article was published (Oct. 24, 2011) the stock was trading at $54.43 a piece. The following dividend were paid:
I myself am long 40 shares of Transocean (RIG) at an average price of $52 each for almost 16 months now.
Transocean saw significant loss in revenue after the Macondo spill on April 2010. The situation was made worse by the ongoing economic crisis around the world.
The negative EPS in 2012 is due to impairment loss. The company sold its shallow water drilling unit for a net charge of $878 million and suffered a net loss of $381 million or $1.06 for the last quarter. If we add the non-recurring item then the profit for the quarter was $1.37 per share.
The going out of the shallow drilling business makes Transocean a pure deepwater play. Transocean was and is tied hand and foot to the deepwater drilling business.
Another heartening thing to see was that the utilization rate has climbed to 81% for “floaters.” This is the highest since the spill.
In another development, Chevron (CVX) and Transocean (RIG) got into another oil spill controversy in Brazil. The government sued them for $11 billion and put an injunction on Transocean which shut down its work in the country. This was largely seen as an overreaction as the spill was only 3000 barrels of oil (compared to 5 million barrels in the BP spill) and there was virtually no impact at the coast line. Thankfully, after nearly a year, the injunction was lifted last month and only the frade field where the leak happened remains closed for Transocean. The situation is a bit worrying in Brazil. The way Brazilian government handled the issue was quite panicky. They stopped Transocean and Chevron managers from leaving the country. They also slapped criminal charges on the management which was unprecedented.
On a positive note, Transocean is gaining a lot of business these days. From the third quarter report:
"New contracts associated with continuing operations totaling $10.2 billion were secured in the
Fleet Status Report periods July 18, 2012 through October 17, 2012. Backlog from continuing
operations was $29.7 billion at October 17th, a net increase of $8.3 billion."
Transocean was also awarded 10 year contracts for construction and operation of four new ultra-deepwater drillships by Shell (RDS-A, RDS-B). This will add an estimated $7.6 billion in revenue for Transocean. Transocean expects to spend $3 billion on four new rigs which will be built in South Korea. The contract is expected to start in mid-2015.
Stocks Discussed: RIG, RDS.A, BP, CVX, RDS.B,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.