Increasing day rates and backlog
Transocean LTD (NYSE:RIG) invested in six ultra-deep water drillships and two shallow-water jackups in late 2012. These drillships will be leased to Shell for a commitment of 40 rig years of work, along with backlog worth $7.6 billion to the company. The drillships are expected to be delivered by early 2015 and the jackups by the second half of 2013.
Transocean LTD (NYSE:RIG)’s existing rigs have seen a rise in day rates. Its deepwater Millennium drillship will be moved to Australia for a two-year contract at the rate of $605,000 per day. The rate has increased from $545,000, which it presently earns. Recently, its mid-water rig off Australia was extended for two more months by ConocoPhillips (NYSE:COP) at a $440,000 day rate, which was increased from $239,000 per day. In July, its Jack Bates, a deepwater rig, will start earning day rates of $525,000 compared to $380,000 that it presently gets paid by Santos.
As of mid-April, the company’s backlog stands at $28.5 billion, of which $19 billion will come from existing and newly built ultra-deepwater rigs. The U.S government has recently opened up 40 million acres for oil and gas exploration in the U.S. Gulf of Mexico. Transocean LTD (NYSE:RIG) has a huge opportunity for growth with these 40 million acres up for auction.
It has set its cost guidance for the fiscal year 2013 between $5.7 billion and $5.9 billion. This has decreased by almost 7% from $6.1 billion in 2012. Further, Transocean LTD (NYSE:RIG) has divested 38 old, low-specification rigs to focus and improve the profile of its existing rigs, like ultra-deepwater, high-specification rigs. This will lead to annualized savings of $300 million by the beginning of 2014.
Conclusion
Transocean LTD (NYSE:RIG)’s backlog and increasing day rates — supported by cost guidance — will prove positive for the company to boost its revenue in the coming years.
Having a technological advantage, Halliburton Company (NYSE:HAL) is slowly shifting its focus on hydrocarbon extraction along with new contracts in hand. This will be beneficial for the company in the long run.
BP plc (ADR) (NYSE:BP) has great spending prospects, which will help it to grow and become the biggest player in the oil and gas industry.
Therefore, I recommend buying all of these stocks for long-term gains.
Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Halliburton Company (NYSE:HAL). The Motley Fool owns shares of Transocean LTD (NYSE:RIG).
The article Oil Lovers Should Not Miss These Companies originally appeared on Fool.com.
Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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