- Transocean (RIG +6.5%) is surging after reported beats in Q2 earnings, revenues and EBITDA, as average dayrates held up better than expected while operating costs came in below guidance.
- In its earnings conference call, RIG CEO Jeremy Thigpen predicted explorers could soon shift their spending from land to sea as "breakeven costs in multiple deepwater basins around the world are consistently coming in below $50 and are now often around, if not below, $40."
- Senior VP Terry Bonno noted that RIG has signed a dozen new drilling contracts or extensions YTD, adding $221M in future work, and said the entire offshore industry has announced almost as much new work this year as it had in the past two years combined.
- "It is beginning to feel a lot like we are moving off bottom," Bonno said. Explorers are expected to sanction more deepwater projects next year if oil holds above "the magic $50 level," Bonno said.
- While development costs for deepwater projects have fallen below $50 in many cases, the time to bring offshore projects to production is still several years, compared to a matter of months for shale work, cautions Barclays (LON:BARC) analyst J. David Anderson.
- Offshore drilling contractors are mostly higher: DO +4.3%, NE +3.6%, ESV +1.9%, ATW -2%.
- Now read: Transocean: Does Performance Still Matter?
Original article