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Transocean (RIG) Up 29.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Transocean (RIG - Free Report) . Shares have added about 29.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Transocean due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Transocean Q4 Loss Narrower Than Expected, Revenues Miss
Transocean reported an adjusted net loss of 9 cents per share in the fourth quarter of 2023. The figure was narrower than the Zacks Consensus Estimate of a loss of 22 cents per share. Moreover, RIG’s bottom line improved from the year-ago period’s reported loss of 49 cents. This improvement can be attributed to a strong fourth-quarter result from RIG's Ultra-deepwater floaters segment.
The offshore drilling powerhouse’s total adjusted revenues of $741 million missed the Zacks Consensus Estimate of $779 million. However, the top line improved 18% from the prior-year reported figure of $625 million.This outperformance was primarily driven by higher operational days.
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed 72.3% to net contract drilling revenues, while Harsh Environment floaters accounted for the remaining 27.7%.
Revenues from the Ultra-deepwater and Harsh Environment floaters totaled $536 million and $205 million, respectively, compared with the year-ago quarter’s reported figures of $434 million and $172 million.
Ultra-deepwater revenues fell short of our projection of $549.8 million, while Harsh Environment revenues exceeded our estimate of $203.1 million.
Revenue efficiency was 97%, higher than 95.4% sequentially but lower than the year-ago quarter’s 98%.
Day rates, Utilization & Backlog
Average day rates in the reported quarter increased to $407,800 from $348,600 in the year-ago quarter. The figure missed our estimate of $462,300.
Average revenues per day from Ultra-deepwater floaters increased to $432,100 from $344,800 in the year-ago quarter. The same from Harsh Environment floaters, however, decreased to $354,700 from $357,900 in the comparable period of 2022.
The fleet utilization rate was 51.6%, up from the prior-year period’s figure of 49.4%.
Transocean’s backlog of $9 billion decreased sequentially from $9.2 billion.
Costs, Capex & Balance Sheet
Operations and maintenance (O&M) costs increased to $569 million from $524 million a year ago. The company spent $220 million on capital investments in the fourth quarter. Cash used in operating activities totaled $164 million.
Cash and cash equivalents amounted to $762 million as of Dec 31, 2023. Long-term debt totaled $7 billion, with a debt-to-capitalization of 40.3% as of the same date.
Guidance
For the first quarter of 2024, Transocean expects adjusted contract drilling revenues of $780 million based on an average fleet-wide revenue efficiency of 96.5% due to increased activity on several rigs, including Deepwater Mykonos, People Orion, KG2 in Brazil, Transocean Endurance in Australia and deepwater vectors in the Gulf of Mexico.
It also projects O&M expenses of approximately $545 million for the same time frame. General and administrative costs are estimated to be $47 million.
Transocean anticipates adjusted contract drilling revenues in the band of $3.6-$3.75 billion, based on 96.5% revenue efficiency for full-year 2024. It also estimates O&M expenses of $2.2 billion and a full-year G&A expense of $196 million. Net interest expense for the first quarter is expected to be $131 million.
The company expects a net interest expense of $513 million for the year, including $16 million in capitalized interest. RIG projects cash taxes of $10 million for the first quarter and $51 million for full-year 2024.
The first quarter's capital expenditures, including capitalized interest, are expected to be $120 million. This includes $81 million for preparing the Deepwater Aquila for its 3-year contract with Petrobras (PBR Quick QuotePBR - Research Report) in Brazil.
Cash taxes are expected at about $15 million for the same quarter and roughly $35 million for full-year 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -460% due to these changes.
VGM Scores
At this time, Transocean has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Transocean is part of the Zacks Oil and Gas - Drilling industry. Over the past month, Nabors Industries (NBR - Free Report) , a stock from the same industry, has gained 9.1%. The company reported its results for the quarter ended December 2023 more than a month ago.
Nabors reported revenues of $737.84 million in the last reported quarter, representing a year-over-year change of -4.1%. EPS of -$3.84 for the same period compares with -$3.89 a year ago.
For the current quarter, Nabors is expected to post a loss of $1.98 per share, indicating a change of -260% from the year-ago quarter. The Zacks Consensus Estimate has changed -14.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Nabors. Also, the stock has a VGM Score of A.
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Transocean (RIG) Up 29.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Transocean (RIG - Free Report) . Shares have added about 29.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Transocean due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Transocean Q4 Loss Narrower Than Expected, Revenues Miss
Transocean reported an adjusted net loss of 9 cents per share in the fourth quarter of 2023. The figure was narrower than the Zacks Consensus Estimate of a loss of 22 cents per share. Moreover, RIG’s bottom line improved from the year-ago period’s reported loss of 49 cents. This improvement can be attributed to a strong fourth-quarter result from RIG's Ultra-deepwater floaters segment.
The offshore drilling powerhouse’s total adjusted revenues of $741 million missed the Zacks Consensus Estimate of $779 million. However, the top line improved 18% from the prior-year reported figure of $625 million.This outperformance was primarily driven by higher operational days.
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed 72.3% to net contract drilling revenues, while Harsh Environment floaters accounted for the remaining 27.7%.
Revenues from the Ultra-deepwater and Harsh Environment floaters totaled $536 million and $205 million, respectively, compared with the year-ago quarter’s reported figures of $434 million and $172 million.
Ultra-deepwater revenues fell short of our projection of $549.8 million, while Harsh Environment revenues exceeded our estimate of $203.1 million.
Revenue efficiency was 97%, higher than 95.4% sequentially but lower than the year-ago quarter’s 98%.
Day rates, Utilization & Backlog
Average day rates in the reported quarter increased to $407,800 from $348,600 in the year-ago quarter. The figure missed our estimate of $462,300.
Average revenues per day from Ultra-deepwater floaters increased to $432,100 from $344,800 in the year-ago quarter. The same from Harsh Environment floaters, however, decreased to $354,700 from $357,900 in the comparable period of 2022.
The fleet utilization rate was 51.6%, up from the prior-year period’s figure of 49.4%.
Transocean’s backlog of $9 billion decreased sequentially from $9.2 billion.
Costs, Capex & Balance Sheet
Operations and maintenance (O&M) costs increased to $569 million from $524 million a year ago. The company spent $220 million on capital investments in the fourth quarter. Cash used in operating activities totaled $164 million.
Cash and cash equivalents amounted to $762 million as of Dec 31, 2023. Long-term debt totaled $7 billion, with a debt-to-capitalization of 40.3% as of the same date.
Guidance
For the first quarter of 2024, Transocean expects adjusted contract drilling revenues of $780 million based on an average fleet-wide revenue efficiency of 96.5% due to increased activity on several rigs, including Deepwater Mykonos, People Orion, KG2 in Brazil, Transocean Endurance in Australia and deepwater vectors in the Gulf of Mexico.
It also projects O&M expenses of approximately $545 million for the same time frame. General and administrative costs are estimated to be $47 million.
Transocean anticipates adjusted contract drilling revenues in the band of $3.6-$3.75 billion, based on 96.5% revenue efficiency for full-year 2024. It also estimates O&M expenses of $2.2 billion and a full-year G&A expense of $196 million. Net interest expense for the first quarter is expected to be $131 million.
The company expects a net interest expense of $513 million for the year, including $16 million in capitalized interest. RIG projects cash taxes of $10 million for the first quarter and $51 million for full-year 2024.
The first quarter's capital expenditures, including capitalized interest, are expected to be $120 million. This includes $81 million for preparing the Deepwater Aquila for its 3-year contract with Petrobras (PBR Quick QuotePBR - Research Report) in Brazil.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -460% due to these changes.
VGM Scores
At this time, Transocean has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Transocean is part of the Zacks Oil and Gas - Drilling industry. Over the past month, Nabors Industries (NBR - Free Report) , a stock from the same industry, has gained 9.1%. The company reported its results for the quarter ended December 2023 more than a month ago.
Nabors reported revenues of $737.84 million in the last reported quarter, representing a year-over-year change of -4.1%. EPS of -$3.84 for the same period compares with -$3.89 a year ago.
For the current quarter, Nabors is expected to post a loss of $1.98 per share, indicating a change of -260% from the year-ago quarter. The Zacks Consensus Estimate has changed -14.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Nabors. Also, the stock has a VGM Score of A.