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Transocean shows update on recent developments

23 July 2018 to 01: 25
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Transocean and its new projects
Transocean reveals in the projects under development

Transocean shows update on recent developments. New contracts and dozens of wells reveal Transocean's development.

Transocean Shows Update On Recent Developments And Uses Another Modern Platform To Offer $600M In Senior Secured Bonds Due In 2025. Transocean 712 Receives 13 Well Contract From ConocoPhillips. The GSF I Development Driller receives a 13-well contract from Chevron. There have been a number of material developments at Transocean (NYSE: RIG) over the last few days, and it's time to go through them one by one.

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First, the company priced an offering of $600 million of senior secured bonds due 2025 at a rate of 6,125% per annum. The notes are guaranteed by Deepwater Pontus, a state-of-the-art rig under contract with Shell (NYSE: RDS.A) (NYSE: RDS.B) from October 2017 to October 2027, with a fee of $519.000. The company has used this trick before, using its modern platforms on long-term contracts to raise cash.

The previous iteration of this strategy was the offering of $750 million in senior secured bonds due 2024 at a rate of 5,875% per annum. These notes are guaranteed by Songa Enabler and Songa Encourage, which were acquired in the acquisition of Songa Offshore. The market continues to show its willingness to lend money to Transocean due to long-term contracts for its best rigs. Rates remain that way, a combination of rising interest rates elsewhere and continued challenges in the offshore drilling market.

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Transocean 712

In another development, Transocean recently announced a 13-well contract for the Transocean 712 semi-submarine. The platform will begin service in March 2019 in the UK North Sea with ConocoPhillips (NYSE: COP). The company stated that the backlog is $75 million while the duration is 580 days, calculating the daily rate at $129.000. This is a very positive development for the company as their former rig will continue to function due to the current rigidity of the North Sea market segment.

new contracts

Transocean also announced an 11-well contract for the deepwater semi-submerged GSF Development Driller I. The rig will work for Chevron (NYSE: CVX) in Australia, starting in the first half of 2019. The work will take 955 days with a backlog of $158 million, calculated for a daily value of $159.000. Australia is currently a small market with few rigs in the region (data from InfieldRigs): one jack-up (Ensco 107) and six semi-subs – Ensco 5006, Ensco DPS-1, Ensco MS-1 (NYSE: ESV), Diamond Offshore's Ocean Monarch, Stena Clyde of Stena Drilling and Transocean I's GSF Development Driller. This allowed Transocean to get a reasonable day (by today's standards, of course) for the rig, although it does show that even tighter Segments, true recovery of everyday life is still far away.

While recent developments are certainly positive for Transocean, I doubt they'll bring much more in the near term. The reason for this is that, in Transocean's case, the most positive cash flow is already locked into its long-term, high-margin contracts from the previous era. In this situation, the market is paying more attention to the general state of affairs in the floating segment of the offshore drilling market, rather than the smaller positive changes (compared to company size) that new contracts bring.

 

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