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Transocean’s CEO Steven Newman; Ricardo Rosa, Senior Vice President and Chief Financial Officer; Ihab Toma, Senior Vice President of Marketing and Planning; and Terry Bonno, Vice President of Marketing discussed Transocean’s 3rd Quarter financial results in a webcast on Thursday.
A few brief excerpts from this conference call:
from Steven Newman, Chief Executive Officer…
The jack-up market
“We continued to view the worldwide jack-up market is stable, though there are some clear trends developing. I think it’s pretty clear that a bifurcation in the jack-up market is taking place.
Utilization for the worldwide fleet is covering in the low 70s and dayrates are in the $50,000 to $75,000 per day range for the lower spec jack-ups while the standard jack-ups are earning $80,000 to a $100,000 per day. However, utilization for high-spec premium jack-ups is in excess of 90%, and dayrates appear to be edging up slightly above the $125,000 to a $150,000 we’ve seen recently.
The midwater market is also stable with dayrates ranging from $200,000 to $250,000 per day. Though there does seem to be some increased interest as our customers approach year end and finalize their 2011 investment plan.”
The Gulf of Mexico
“Despite the continuing uncertainty in the Gulf of Mexico, coming most recently from the court’s decision to overturn NTL-05, we continued to see evidence of our customer’s long-term commitment to the region.
Late last month, Chevron announced the approval of a $7.5 billion project to develop the Jack and St. Malo deepwater fields. Our Gulf of Mexico revenue in the third quarter reflected this uncertainty. The only rigs which collected operating rate with those supporting BP in Macondo response operation. Other than rigs in the shipyard, the rigs were on standby or special standby as a result of the government imposed moratorium.
Currently, none of our Gulf of Mexico rigs is in a force majeure situation. With the moratorium now officially lifted, we should see a gradual return to normal levels of activity in the Gulf.
The historical performance of our equipment and our people has built strong relationships across our entire customer community. These strong relationships have served us well through the last six months as none of our Gulf of Mexico contracts have been terminated, we have preserved our entire Gulf of Mexico backlog, and we haven’t suffered deterioration in terms of our Gulf of Mexico contracts.”
from Terry Bonno, Vice President of Marketing…
The ultra-deepwater market
“Activity in the ultra-deepwater market has been brisk with several contracts, albeit a few of short-term duration, being executed by the speculative new builds in various market. Even with a temporary near-term softness in the ultra-deepwater market, this last quarter alone resulted in several new contracts, all at market dayrates well above 400,000.
If we combine this positive move with the efficient listing of the moratorium, the continuing success in Brazil and West Africa and the potential for incremental demand in the US Gulf of Mexico, we see improving customer sentiment and increasing demand moving the market in the right direction.”
“Moving to Brazil, further delay is expected in awarding the Petrobras new build tender for up to 28 units, supporting our belief that additional incremental demand will be needed to bridge the gap to the deliveries of the Brazilian new build. ”
“We are closely monitoring the upcoming drilling programs in the emerging markets of East Africa, Ghana, Liberia, Sierra Leone, Ivory Coast, and the Black Sea with the expectation that future ultra-deepwater demand will continue to grow and add to the already solid worldwide resource base that supports our optimistic view about the healthy future of the ultra-deepwater market.”
The deepwater market
“The two remaining marketed deepwater units available in 2010, the Discoverer 534 and M.G. Hulme, are under consideration by our customers and we expect to capitalize on these opportunities shortly.”
“We believe the deepwater fleet could be challenged by the near-term availability at higher spec ultra-deepwater units continue down.”
The harsh environment market
“Norway continues to present opportunities for our existing fleet with open tendering from various operators. An additional requirement, offshore Eastern Canada is expected will be incremental to the existing fleet offshore Newfoundland. Our presence and performance in both Norway and Canada places us in a great position to further expand our business in both markets.“
The midwater floater market
“Tendering remained active, but the contracting pace slowed a bit in the third quarter. Opportunities, generally short-term in duration, continue to materialize in the UK, Asia, and Australia. We also expect to participate some long-term tenders in India in the next few months.”
“We remain optimistic that oil prices ability will continue to fuel more projects, however we are concerned with the oversupply of deepwater units that could also compete in the midwater market space.”
The jack-up market
“Tendering activity increased while resulting fixtures remained steady over the previous quarter with high-spec jack-ups attracting long-term contracts, while the standard jack-up market remained relatively short duration.
The Transocean fixtures during the quarter are as follows: extension of the GSF 141 at $55,000 for six months in Equatorial Guinea, extension of the GSF Galaxy 2 at 150 for two wells in the UK, and a new contract with the GFS Galaxy 2 at 150 for two wells in the UK.”
“We are optimistic about continuing tendering activity and expect to reactivate a few of our units between now and the first quarter of 2011.”
“However, we remain cautious about the supply overhang from the uncontracted newbuild entry and expect that some more stacking of standard rigs may occur in the near term. As Steven mentioned in his opening comments, we have seen a bifurcation in the jack-up market, whereby the market utilization for high-spec jack-up is over 90%, while standard jack-up utilization is around 75% for the total international jack-up fleet.”
“While we are seeing some downward pricing pressure on the standard jack-up, the high-specification jack-up rates are improving along with increasing worldwide demand, and we expect this to continue through 2010 and 2011. This divergence of utilization can be attributed to efficiency and operational capabilities of the high-spec unit as compared with the standard jack-up fleet.”
A complete transcript of this conference call, including remarks by Ricardo Rosa, Ihab Toma, and the follow-on Q&A session can be found by visiting SeekingAlpha.com or by clicking here.
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