Buy Rating on Transocean: Projected EBITDA Growth and Favorable Drillship Market Dynamics

Analyst Gregory Lewis from BTIG maintained a Buy rating on Transocean (RIG – Research Report) and keeping the price target at $12.00.

Gregory Lewis has given his Buy rating due to a combination of factors surrounding Transocean’s recent contract achievements and the broader industry outlook. He highlights the significant one-year contract extension for the Deepwater Asgard drillship at a rate exceeding $500K per day, which indicates a strong ceiling for future dayrates. This contract, along with expected upcoming spot jobs, suggests an upward trajectory for drillship pricing in the U.S. Gulf of Mexico. Lewis also notes the potential for near-term contract awards in Brazil and West Africa to be slightly lower but still robust, contributing to a positive outlook for the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA).

Furthermore, Gregory Lewis’s analysis points to a tightening market with a limited number of high-end drillships available, which could drive pricing higher in the coming quarters. He observes that roughly 22 rigs will require work later this year, but with a combination of outstanding tenders, contract extensions, and direct negotiations, the market dynamics are expected to remain favorable. Lewis’s valuation of Transocean incorporates an EBITDA estimate for the years ahead, which, when combined with above-average dayrate assumptions, supports a strong deleveraging prospect for the company. This financial projection, coupled with the current market conditions, forms the basis for his Buy recommendation and the $12 price target for Transocean’s stock.

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Transocean (RIG) Company Description:

Transocean Ltd. engages in the provision of offshore contract drilling services for oil and gas wells. It also owns and operates offshore drilling fleet such as ultra-deepwater, harsh-environment, deepwater, and midwater rigs. The company was founded in 1954 and is headquartered in Steinhausen, Switzerland.