Transocean (NYSE: RIG) is not getting much praise for beating analyst estimates on earnings and revenue. Risks are still high that the UDW – ultra-deep water – market is over-supplied. Yet the rebound in oil prices appears sustainable. That implies RIG stock is a bargain.
Transocean lost $0.24 a share but beat consensus by $0.04/sh. Revenue fell 35.4% to $629 million. RIG took a $66 million charge related to the U.U. Tax Reform. Its charge was offset by a $31-million valuation allowance.
Even though results met expectations, management’s commentary was not as bullish as before. IT experienced issues with the Petrobras 10000 drill ships, leading to lower revenue efficiency for the quarter.
Management said: “While we were certainly proud of our overall safety performance from January through November, on the morning of December 2, a tragic accident occurred on board the Petrobras 10000, resulting in a fatal injury.”
For 2018, efficiency is a priority. Rig health will come through new agreements signed already. Transocean executed them with five suppliers.
This will cut costs and improve RIGs uptime. In short, its investment in the business will pay off as drilling day rates improve in the longer term.
Disclosure: Author owns shares of Transocean
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