Transocean CEO on new contracts, speculative shipbuilding, and the Deepwater Horizon [WEBCAST BREAKDOWN]

In a webcast yesterday, Transocean, Ltd. (NYSE:RIG) CEO, Steven Newman, had a lot of positive news for investors, in stark contrast to their dismal stock price of $54 per share, a full $13 below their book value of $67.

Between April and June of this year, Transocean has won $1.5B in new contracts

Of particular note, they signed a 1-year contract extension with BP for their Discoverer Enterprise drillship at a rate of $492,000 per day.  This rig was made famous last year when it lowered the final capping stack on the Macondo Well, stopping the disastrous subsea oil leak.

Additionally, the jack-up rig, Key Gibraltar was reactivated for Chevron in Thailand, the semi-submersible M.G. Hulme was tasked with a 3–well project for ONGC in India, and GSF Rig 141 was put on a 2-year contract with a BP joint venture in Egypt.

Steven Newman on speculative ship building…

“Building on speculation is not good for the industry or Transocean and will have a negative impact on day rates and asset utilization.”  Additionally, customers have consistently voiced their desire to have rigs built to their exact specifications based on identified future work and operating environment.”

Mr. Newman continues by stating, “just as important as the assets being built, is having the teams in place to run them… This depth in expertise, combined with our strong balance sheet, will provide us the flexibility to take advantage of potential opportunities as they arise in the market.  Finally it’s important to keep in mind that we just completed a 10-rig, $7B newbuild program that positions us well in the ultra-deepwater market for the long term.”

On Macondo and the Deepwater Horizon disaster…

In response to the USCG report, Transocean disputes 4 key points.  (gCaptain disputes quite a few more, see our review here)

1. Ignition did not result from poorly maintained equipment
2. The engines on the Deepwater Horizon did not fail to shut down upon detection of gas
3. The Blowout Preventer (BOP) was properly maintained
4. The general alarm did not fail to operate automatically

In an internal Transocean investigation completed on June 22nd, they determined that

“Macondo incident was the result of a succession of inter-related well design and construction decisions that compromised the integrity of the well and compounded the risk of it’s failure.  Finally, we continue to believe that through a legally binding contract with Transocean, BP agreed to assume full responsibility for the costs and liability of any pollution, contamination, and environmental damage caused by hydrocarbons that leaked from the Macondo Well.  That contract indemnifies Transocean against all such claims.”