Image: Ocean Rig Poseidon from OET.
Summary
- Transocean to acquire Ocean Rig for approximately $2.7 billion.
- Transocean noted in the press release that the combined fleet is comprised of 57 floaters, with 17 of the top 50 and 31 of the top 100 ultra-deepwater drillships in.
- Transocean's acquisition of Ocean Rig UDW is good news for the long-term even if the stock price experiences some immediate weakness that should be seen as an opportunity.
Investment Thesis
Transocean (RIG) is one of the strongest offshore drillers with a record backlog of about $11.5 billion as of 09/01/2018.
Note: Backlog is an estimate by Fun Trading
As I said in my preceding article, Transocean is my most significant long-term investment in the offshore drilling sector. My recommendation has not changed for the last two years, and I still recommend accumulating the stock for the long-term primarily because the company will be the first to benefit from a floaters recovery that seems slow to materialize.
However, signs for a possible floaters recovery at the end of 2018 or early next year are increasing after the recent second-quarter results. One caveat is that the day rates will be slower to improve due to a massive rig oversupply which will slow the pace of the stock appreciation significantly.
