The share price of Transocean Ltd. (RIG Quick QuoteRIG - Free Report) has gone up 13.6% since the fourth-quarter 2021 earnings announcement on Feb 22.

Apart from the general bullishness around the energy sector due to surging commodity prices, this stock’s performance could be attributed to total fleet average daily revenues in the fourth quarter of 2021 rising to $352.5 million from $347.5 million in the year-earlier quarter and total revenues beating the Zacks Consensus Estimate.

Behind the Earnings Headlines

Transocean reported an adjusted net loss of 19 cents per share for the fourth quarter of 2021, wider than the Zacks Consensus Estimate of a loss of 10 cents. This underperformance reflects a dip in revenue efficiency and lower-than-expected utilization, which, at 53.4%, missed the consensus mark of 57%.

However, Transocean’s bottom line improved from the year-ago period’s loss of 34 cents due to higher dayrates in the Harsh Environment floaters segment.

The offshore drilling powerhouse’s total adjusted revenues of $671 million beat the Zacks Consensus Estimate of $668 million. However, adjusted revenues fell 2.76% from the year-earlier figure of $690 million.

Segmental Revenue Breakup

Transocean’s Ultra-deepwater floaters contributed to 69.6% of the total contract drilling revenues, while Harsh Environment floaters accounted for the remaining 30.4%. In the fourth quarter of 2021, revenues from Ultra-deepwater and Harsh Environment floaters totaled $432 million and $189 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $440 million and $250 million.

Revenue efficiency was 94.5%, lower than 98.1% reported sequentially, and lower than the year-ago value of 97.2%.

Dayrates, Utilization & Backlog

Average dayrates in the quarter rose to $352,500    from the year-ago level of $347,500 and also beat the Zacks Consensus Estimate of $333,000. RIG witnessed a strong year-over-year increase in average revenues per day from Harsh Environment floaters from $357,500 to $387,700 but a decrease in the same from Ultra-deepwater floaters from $342,100 in the year-ago quarter to $337,100. Overall, fleet utilization was 53.4% in the quarter, down from the prior-year period’s utilization rate of 58.4%.

Transocean’s backlog record of $6.5 billion for the quarter reflects a sequential decrease from $7.1 billion from the last quarter.

Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $430 million from $465 million a year ago. The company spent $71 million on capital investments in the fourth quarter. Cash provided by operating activities totaled $185 million. The company had cash and cash equivalents worth $976 million as of Dec 31, 2021. Long-term debt was $6.66 billion with debt-to-capitalization of 37.3% as of the same date, declining from the sequential quarter’s 37.6%.

Guidance
For the first quarter of 2022, this offshore drilling contractor expects adjusted contract drilling revenues of $600 million, indicating a decline from the sequentially reported figure of $671 million. For full-year 2022, It expects adjusted revenues of approximately $2.7 billion, operations and maintenance expenses of $1.7 billion. Its general and administrative expenses for the first quarter are expected at $44 million, and between $175 million and $180 million for the full year. Net interest expenses for the first quarter are forecast to be approximately $104 million and about $402 million for 2022, while the capital expenditure, including the capitalized interest for the first quarter, is estimated at $121 million. This liquidity projection includes the estimated 2022 Capital Expenditure (capex) of $1.3 billion, which includes $1.2 billion related to newbuilds and $100 million for maintenance capex.

Finally, Transocean management sees 2022 as one of the best years in a long time, with the growing customer demand and the high-specification rig usage going up.

Zacks Rank & Stocks to Consider

Transocean currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space are Occidental Petroleum (OXY Quick QuoteOXY - Free Report) , ConocoPhillips (COP Quick QuoteCOP - Free Report) and ExxonMobil Corporation (XOM Quick QuoteXOM - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Occidental Petroleum is an integrated oil and gas company with significant exploration and production exposure. As of the 2020 end, Occidental’s preliminary worldwide proved reserves totaled 2.91 billion Barrels of oil equivalent (boe) compared with 3.9 billion Boe at the 2019 end.

Occidental Petroleum’s earnings for 2022 are expected to surge 81.2% year over year. OXY witnessed five upward revisions in the past 30 days. It beat the Zacks Consensus Estimate thrice in the last four quarters and missed the same once, with an earnings surprise of 13.7%, on average.

ConocoPhillips reported fourth-quarter 2021 adjusted earnings per share (EPS) of $2.27, beating the Zacks Consensus Estimate of $2.20. ConocoPhillips reported preliminary 2021 year-end proved reserves at 6.1 billion Boe.

ConocoPhillips’ earnings for 2022 are expected to soar 62.1% year over year. COP revised higher its expected 2022 return of capital to shareholders. The new guidance of $8 billion reflects an increase from the prior projection of $7 billion. The incremental returns to stockholders will be distributed through share repurchases and VROC tiers.

ExxonMobil reported fourth-quarter 2021 EPS of $2.05, excluding identified items, beating the Zacks Consensus Estimate of $1.96. At the end of the fourth quarter, ExxonMobil’s total cash and cash equivalents were $6.8 billion.

ExxonMobil is expected to see an earnings growth of 28.1% in 2022. XOM initiated share repurchases at the beginning of the March-end quarter this year. The buybacks are associated with the repurchase plan announced earlier, representing the program of repurchasing up to $10 billion over the next 12 to 24 months.