After a tough start, Transocean LTD (NYSE:RIG) CEO Jeremy Thigpen had finally taken some appropriate steps to prepare his company for the challenging period. As of now, the company is well positioned for $70 per barrel oil compared to $90 or $50 per barrel oil. The company’s cadre of harsh environment and ultra-deepwater rigs along with adequate liquidity will help it to survive in the tough times.
Way to move
On September 8, 2015 Transocean and various other underwater driller firms including ENSCO PLC (NYSE:ESV) and Atwood Oceanics, Inc. (NYSE:ATW) participated in the Barclays Energy-Power Conference. The respective management sounded gloomy with a small ray of light at the tunnel’s end as expected by most of the participants.
The presentations highlighted that these companies are well contracted and boasts a big dollar backlog for the year. They have ample liquidity and don have shipyard payments unfunded/due or big debt in the books.
The writer of article said that all the presentations including that of Transocean appear credible. The main issue in the industry is lack of demand. There are ample old rigs that are not harsh environment and ultra-deepwater capable, still termed operational that will probably never work again. Lastly, a major part of the rig overhand comes from un-contracted spec rigs.
Transocean LTD (NYSE:RIG) CEO exhibited strategic insight together with industry and corporate leadership. In fact he demonstrated a more practical approach that was not present in the beginning of his tenure. The first thing that highlighted a realistic approach was the announcement of company’s extraordinary meeting of shareholders to remove the dividend and impair assets worth $2 billion.
He further provided a feasible and realistic view on the underwater drilling market future. Essentially highlighting three different cases depending on crude price, Mr. Thigpen provided an excellent industry perspective beyond the popular belief of cheap oil – bad, high oil – good.