Transocean’s (RIG:NYE) share price has increased by more than 185% over the past six months, as offshore contract drilling services have become increasingly in demand. As evidenced by their price targets, analysts anticipate that the RIG stock surge may soon come to an end, despite the management’s optimism over continued demand.
Utilization and day rates are being driven by the company’s increased offshore contractual activities, which is responsible for its excellent demand. In addition, new contract wins and robust backlogs predict a prosperous future for Transocean. According to the February 2023 fleet status report, the company’s contract backlog increased by $1.5 billion during the fourth quarter of 2022, bringing the total to $8.5 billion.
The robust market environment suggests that RIG’s asset utilisation will continue high, and the high day rates will bolster the company’s finances. Also, the company’s focus on right-sizing its balance sheet and obtaining high-quality backlogs should assist its expansion.
While management’s focus on deleveraging its balance sheet and the Chairman’s acquisition of RIG stock reflect their confidence in the company’s future prospects, the upside potential of RIG stock may be constrained by the company’s high debt level of over $7.3 billion.
RIG stock is rated as a Hold by Citigroup analyst Scott Gruber. While he believes that the fundamentals are improving as a result of rising day rates, the stock’s high leverage and adverse macro environment make its current price reasonable.
Buy is the consensus rating for the RIG stock. The average price target among analysts is $6.91, indicating a potential upside of 3.41 percent.
Company Profile:
Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. It contracts its mobile offshore drilling rigs, related equipment, and work crews to drill oil and gas wells.
It serves integrated energy companies, government-owned or government-controlled energy companies, and other independent energy companies. Transocean Ltd. was founded in 1926 and is based in Steinhausen, Switzerland.
