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April 19, 2015

RIG: More Idle and Early Termination

Offshore drilling behemoth, Transocean Ltd. (RIG - Analyst Report) has provided a monthly fleet status report for the period from Mar 18, 2015. The value of all the new deals and extensions in contracts, during the aforesaid time frame, is estimated at roughly $26 million. The update covers the company's offshore drilling rig status and contract information.

Transocean added that the expected out-of-service time for 2015 has been lowered by 59 days, primarily due to the third generation semi-submersible, GSF Rig 140.

Per the report, Sedco Express – a fifth generation semi-submersible rig – has received a 45-day contract extension, under which it will continue to work in offshore Nigeria. Sedco Express is expected to work at a dayrate of $300,000. The award has added $14 million to the company’s existing project backlog.

The company further mentioned that the jackup rig GSF Galaxy II will work in the U.K. sector of the North Sea under a two month contract extension. The rig will work at a dayrate of about $190,000, adding approximately $12 million to Transocean’s backlog.

Transocean also announced that the fifth generation semi-submersible, Sedco Energy, has been released from contract. However, per the contract, Transocean is expected to receive a certain payment in case of an early termination.

The rigs – Discoverer Enterprise, Sedco Energy, Transocean Amirante, and GSF Galaxy III – have currently been marked as idle by the company.

Also, the drillship GSF Explorer, which is currently classified as held for sale, will be scrapped. The company anticipates a non-cash charge of about $100–$120 million in the second quarter for the same. The company has announced plans to scrap a total of 19 floaters, till date.

Transocean currently carries a Zacks Rank #3 (Hold).

Better-ranked players from the broader energy space include Marathon Petroleum Corp. (MPC - Analyst Report), Valero Energy Partners LP (VLP - Snapshot Report) and Cheniere Energy Partners LP. (CQP - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

Courtesy Zacks Investment Research

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