Rig Count Expected to Decrease for Transocean (RIG); Impact on EPS Not as Worse as Expected

On a recent investor call, Transocean RIG said that they have yet to receive documentation from the federal government that its rigs must cease drilling, but expects notification soon. According to RIG, the company has not yet begun conversations with customers regarding force majeure, but did acknowledge that all fourteen of its floaters in the Gulf of Mexico have such clauses. Pritchard Capital Partners is reporting that “RIG is guaranteed 75% of all contracted day rate revenues from its Gulf of Mexico (GOM) fleet, likely paid out on a quarterly basis if declared force majeure, but again it varies by rig. Additionally, rigs that are not transferred to international waters and go idle in the GOM would likely be warm stacked, reducing operating costs.” This would indicate that earnings per share estimates are unlikely to take as big of a hit as once expected, likely falling towards “the high-$7 to low-$8 level as opposed to the sub-$6 level in a bear case scenario,” according to Pritchard Capital analysts. Shares of Transocen RIG are lower on the session by 5.34%, currently trading $56.20.