Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Transocean Ltd (RIG, Financial) reported an adjusted EBITDA of $342 million with a strong margin of approximately 36% for the third quarter of 2024.
- The company secured new contracts and extensions, ensuring excellent fleet utilization for the next 12 to 18 months.
- Transocean Ltd (RIG) has a high-quality backlog of $9.3 billion, representing a 7.5% sequential increase from July 2024.
- The company owns the only two eighth-generation ultra-deepwater drillships in the world, which are highly sought after by customers.
- Transocean Ltd (RIG) has successfully insulated itself from near-term utilization concerns, with active fleet utilization for 2025 exceeding 97%.
Negative Points
- Transocean Ltd (RIG) reported a net loss attributable to controlling interest of $494 million for the third quarter.
- The company experienced reliability issues with its new 20,000-psi blowout preventers, impacting uptime performance and revenue efficiency.
- There are concerns about potential day rate fluctuations due to utilization headwinds faced by competitors.
- The company faces challenges related to cost inflation, with expectations of 3% inflation in 2025.
- Transocean Ltd (RIG) has a significant debt level, with plans to reduce debt by a minimum of approximately $715 million in 2025.
Q & A Highlights
Q: What are your expectations on the trajectory of day rates for next year, considering the utilization headwinds faced by your peers?
A: Roddie Mackenzie, EVP & Chief Commercial Officer, explained that Transocean's average fixture for their 1,400-tonne class and above in 2024 has been around $520, firmly in the 500s. He noted that while there might be soft spots, many programs run longer than expected, and direct negotiations often occur. Jeremy Thigpen, CEO, added that Transocean's 1,250-tonne rigs are on longer-term contracts, and the 1,400-tonne and 1,700-tonne rigs have consistently secured contracts at premium day rates, even during downturns.
Q: How many of the remaining sideline 7G drillships do you expect to announce a contract for next year?
A: Roddie Mackenzie stated that Transocean is in no rush to bring their sidelined rigs to market, suggesting it would be smarter to target the 2026-2027 timeframe when more projects are expected to be sanctioned. Jeremy Thigpen added that decisions might be made in 2025 for contracts starting in late 2026 or 2027, estimating that one to three cold-stacked assets might be contracted in 2025.
Q: What are your thoughts on industry consolidation, and can you comment on recent press reports about potential transactions?
A: Jeremy Thigpen emphasized that Transocean believes consolidation is healthy for the industry and has led such efforts. He noted that the industry structure has improved significantly over the past decade, with fewer players and assets. While Transocean is open to consolidation, any potential deal would need to be at the right value and focus on asset quality.
Q: Could you elaborate on the BOP reliability issues mentioned earlier?
A: Keelan Adamson, President & COO, explained that the issues are related to the infant mortality of components in the new 20,000-psi BOPs, which is not unexpected given the technology's revolutionary nature. Transocean is working with OEM partners to resolve these issues quickly, drawing on past experiences with higher spec 15k BOPs.
Q: What level of underlying cost inflation is embedded in the 2025 cost guide?
A: Thad Vayda, EVP & CFO, noted that inflation in 2024 was between 5% and 6%, varying by jurisdiction and activity. For 2025, Transocean assumes an average inflation rate of around 3%. He also mentioned that longer-term contracts typically pass through the majority of inflation to the customer.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
