Transocean Closes Senior Note Offering Worth $625 Million

Offshore drilling giant Transocean Ltd. (NYSE:RIG) recently declared that its fully owned subsidiary, Transocean Proteus Limited, has closed the previously announced offering of senior secured notes worth U.S. $625 million. These notes are due to mature by 2024.

The Transocean unit offered Senior Notes with an interest rate of 6.25% that are due to be callable after Dec 1, 2020. The company estimates net proceeds of around U.S. $609 million after removing purchase discounts and offering costs.

The Notes will receive guarantee from Transocean, its affiliate Transocean Inc. and a wholly owned indirect subsidiary that owns Deepwater Proteus. Moreover, the Senior Notes will be secured by a lien on Deepwater Proteus and various other assets related to the rig. The subsidiary plans to utilize the net proceeds from the offering to partially finance the construction of Deepwater Proteus.

Switzerland-based Transocean is the world’s largest offshore drilling contractor and leading provider of drilling management services. Year to date, the Zacks categorized Oil and Gas Drilling Industry has registered an impressive growth of 19.36%. However, the Transocean stock has underperformed the industry by registering a growth of 17.53% only.

This is because, the ongoing weakness in oil prices have hurt Transocean's business big time. Hence, we expect Transocean shares to remain soft until oil prices rebound sufficiently as deepwater/ultra-deepwater drilling – with its associated risks and steep costs – require a far higher oil price than the prevailing levels.

However, Transocean offers unmatched levels of earnings and cash flow visibility, given its technologically advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power.

As a result, the company currently carries a Zacks Rank #3 ( Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector include Braskem S.A. (NYSE:BAK) , Ocean Rig UDW LLC (NYSE:RIG) and McDermott International Inc. (NYSE:MDR) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.

Ocean Rig, on the other hand, delivered an average positive earnings surprise of 66.39% in the last four quarters.

In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.

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