Calm Seas for Transocean's Rigging Markets

(MoneyWatch) 

• The Company: Transocean, the world's largest offshore drilling contractor.
• The Filing: Form 10-Q filed with the SEC on August 6, 2008.
• The Finding: Demand for offshore drilling units continues to be strong, particularly for floaters. In the second-quarter ended June 30, Transocean reported that average rates for its fleet of deepwater floaters increased 32 percent from last year, on average, to $360,500 per day.

The Upshot: Transocean operates a contract drilling fleet of 39 High-Specification Floaters (capable of drilling in water depths up to 10,000 feet). As of August 1, only three of these floaters had any available uncommitted time in 2009.

In June and July, Transocean announced a total of seven contract awards for its high-end floaters, resulting in 30 contracted years and $4.9 billion of estimated contract revenues. Italian oil company Eni SpA contracted the drillship Deepwater Pathfinder for five-years (starting in March 2010), at a record dayrate of approximately $650,000 per day. Built in 1998, the PathFinder is currently under contract to a consortium lead by Shell and Chevron through July 2009 at a price of $395,000 a day.

New offshore discoveries are pumping up demand, too. In July, the company said it received contracts for four rigs worth about $3 billion from Brazilian state-run oil company Petrobras, which is drilling oil wells in deepwaters off the Brazilian coast, known as the Tupi Field.

According to the company's Fleet Status Report, Transocean has an additional 10 deepwater rigs under construction, of which five will be capable of drilling in water depths up to 12,000 feet.

The Question: Will deepwater drilling projects remain financially viable if oil price levels drop -- and stay -- at lower levels?