Transocean LTD (RIG) Improves Operations and Develops Strong Backlog

January 11, 2013

Transocean LTD (RIG) continues to improve its operations in a favorable commodity-price environment with a strong revenue backlog. Philip Weiss, Senior Analyst at Argus Research Company, interprets these signs as the beginning of a turnaround for RIG, and he says this name provides deep value for investors.

“Another possible benefit is that they also sold 35 or so their jack-up rigs to a private equity firm. Transocean is going to retain a piece of that business, but I still like the move. It will benefit margins, and with the jack-up market being relatively strong, it should be a good time to sell these rigs, many of which are relatively old,” Weiss said.

Weiss says the stock peaked at over $160 in 2008 and at the current levels he says there is room for growth, especially as the company carries a backlog that approaches $30 billion. Transocean is currently building more capacity to meet demand, and they are growing efficiency and the number of deepwater resources plays is also growing.

“They’re buildings new rigs, and I think that’s important, and they have contracts for those rigs, which is even better. And I think that’s the first one that I think of in terms of companies that are really well positioned right now. One thing to remember though is that this looks like a deep value play, so it may take a little bit longer to generate strong gains. But I think it’s one that you have an opportunity now to get a good price and do well on that stock,” Weiss said.