Deepwater Titan drillship; Source: Transocean

Transocean anticipates more long-term rig deals over next few months

Offshore drilling contractor Transocean is looking forward to securing new assignments for its rig fleet, thanks to the high demand for offshore drilling services on the global oil and gas stage. The rig owner’s expectations of further long-term contracts are fueled by the current upcycle and deals awarded in the first quarter of 2024.

Deepwater Titan drillship; Source: Transocean

Transocean’s most recent fleet status report shows that the rig owner’s aggregate incremental backlog associated with two contract extensions, which were obtained in 1Q 2024, is approximately $248 million, lifting the firm’s total backlog to around $8.9 billion as of April 17, 2024. Within its previous fleet status report, the company revealed more work for drillships and semi-submersibles, however, the latest one is all about drillship assignments. With the drilling market upcycle in full swing, the offshore drilling heavyweight raked in a $3.2 billion boost in contract backlog last year.

The drilling giant’s results for 1Q 2024 display a net income attributable to controlling interest of $98 million, representing a loss of $104 million compared to $202 million in 4Q 2023. The results for 1Q 2024 entailed net favorable items of $120 million, primarily due to $121 million discrete net tax items. After consideration of these net favorable items, the first quarter 2024 adjusted net loss was $22 million, a difference of $74 million compared to a profit of $52 million in 4Q 2023.

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The firm’s adjusted EBITDA was $199 million in 1Q 2024, an increase of $122 million compared to $77 million in the prior quarter. In addition, the drop in capital expenditures to $83 million in 1Q 2024 from $220 million in 4Q 2023 is primarily associated with the Deepwater Aquila newbuild ultra-deepwater drillship.

The rig owner’s total contract drilling revenues increased sequentially by $22 million to $763 million in 1Q 2024 due to increased activity for rigs that returned to work or were fully active this quarter after undergoing contract preparation, higher day rate, and higher reimbursable revenue. This was partially offset by lower revenue efficiency across the fleet, particularly on the Deepwater Titan drillship which experienced significant unscheduled downtime related to its blowout preventer, and one less day in the quarter. The drillship has since resumed day-rate operations.

Furthermore, the drilling contractor’s total fleet average revenue efficiency was 92.9% in 1Q 2024, compared to 97% in the prior quarter and 97.8% in 1Q 2023. The ultra-deepwater floaters’ revenue efficiency for 1Q 2024 was 92.7%, compared to 96.8% in 4Q 2023 and 97.4% in 1Q 2023. On the other hand, the company’s harsh environment floaters recorded revenue efficiency for 1Q 2024 of 93.3%, compared to 97.6% during the previous quarter and 98.7% in 1Q 2023.

Transocean’s total fleet utilization in 1Q 2024 was 53.7%, compared to 51.6% in the fourth quarter of 2023 and 51.9% in 1Q 2023. While the ultra-deepwater floaters’ utilization for 1Q 2024 was 51.2%, compared to 46.8% in 4Q 2023 and 52.5% in 1Q 2023, the harsh environment floaters’ utilization for 1Q 2024 was 62%, compared to 66.7% during the previous quarter and 50.1% during 1Q 2023.

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Jeremy Thigpen, Transocean’s Chief Executive Officer, commented: “Over the first months of 2024, Transocean has achieved some fairly significant milestones. First, we secured a 365-day extension on Deepwater Asgard at a rate of $505,000 per day, once again demonstrating the sustained tightness in the high-specification floater market as well as Transocean’s ability to command industry-leading dayrates.

“Additionally, earlier this month we finalized a $1.8 billion debt refinancing transaction, enabling us to improve near-term liquidity and start the process of simplifying our balance sheet. We also completed the extension of our revolving credit facility to mid-2028, further enhancing our financial flexibility.”

Based on Transocean’s results, the contract intangible amortization represented a non-cash revenue reduction of $4 million in 1Q 2024, compared with $7 million in the prior period while the operating and maintenance expense was $523 million, compared to $569 million in 4Q 2023, primarily due to cost savings on rigs that were idle in the first quarter, reduced contract preparation expenses, and lower in-service maintenance cost on the operating fleet, which was partially offset by higher reimbursed expenses.

According to Transocean, the cash used in operating activities was $86 million during the first quarter of 2024, representing a dip of $184 million compared to cash provided by operations in the prior quarter. The sequential decrease is said to be the result of increased payments that regularly occur in the first quarter of each year for payroll-related costs and interest expenses.

“Looking ahead, we remain encouraged by the demand outlook and expect to see numerous long-term contracts awarded over the next several months. As we work to secure those contracts, we will remain acutely focused on operational execution across our fleet, as we endeavor to maximize the conversion of our industry-leading backlog to cash,” concluded Thigpen.