From: vince farrell [mailto:vfarrell@scotcap.com]
Sent: Thursday, February 21, 2008 4:25 PM
Sent: Thursday, February 21, 2008 4:25 PM
This is an update I circulated to my partners re. Transocean. It's an update on new rigs
I might not be on the call tomorrow, so I wanted to get this to you. A Norwegian company, Ocean Rig, signed a 10,000 foot semi to a 3 year contract starting mid-2008 for $617,000 a day with a two year option. Like I said, RIG has three similar rigs that would be available 2009 and will probably get a similar rate. $600,000 a day is an alltime wow record.
RIG has 8 rigs under construction. 4 deep water drillships will be delivered in March '09, April '09, and two in April 2010, all of which have long contracts. A semisubmersible will be delivered in Q1 '09 and will enter a seven year contract. The company has a 50/50 joint venture in two newbuild drillships with delivery in the second half of '09. One has a $530,000 a day contract and the other is close to a similar deal. The only spec rig comes from the Global Santa Fe side of the merger, and that's a $740,000 cost drillship with a second half of '09 delivery date and no contract.
There is very strong interest in new builds from a variety of companies and locations. The company sees an "urgent requirement" for deepwater rigs offshore India, and offshore Brazil where Petrobras is negotiating renewals for existing rigs. Transocean sees strong demand offshore West Africa, Asia, and, as I have mentioned before, Pemex (Mexico) is woefully behind its exploratory needs and there will be, in my opinion, desperate demand for deep rigs in the Gulf.
I expect the company to announce several new builds vs. contracts over the next couple of years, with one probably this year. These new rigs at the current day rates will propel earnings estimates upwards. I continue to think this is a core holding.
Lehman and Bear Stearns provided most of the data. The opinion is mine.
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