Deepwater Champion Drillship

Transocean Is The Decade’s Biggest Loser

gCaptain
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May 15, 2020

The Transocean Winner is loaded onto the submerged OHT Hawk in the Isle of Lewis’ Broad Bay. Photo: MCA

With COVID19 wreaking havoc in the stock market, you might think that travel or tourism stock might be the biggest losers of the past decade. But, according to a new report by Kiplinger, we are technically still in an eleven-year bull run. Many companies are still making money but the biggest losers, like Transocean,  have lost big.

With a current market value of about $1.5 billion, Transocean is down a full negative 95.1 percent over the last eleven years.

“Onshore shale producers are hurting these days. But the beauty of the shale plays is that they are relatively easy to switch on or off as demand warrants” says Charles Lewis Sizemore a contributing writer for Kiplinger. “It’s not that expensive to drill a new well, and production declines quickly. So long as you’re well-capitalized, a good shale producer can survive in this market… This brings us to Transocean (RIG, $2.44), a leading offshore driller.”

Transocean specializes in operating large exploratory drillships and oil rigs capable of highly technical,  ultra-deepwater drilling.

Transocean’s shares have been sinking since the loss of the company’s offshore oil rig Deepwater Horizon, ten years ago, but this tragedy and falling oil prices are not the only factors in the company’s demise. Poor management decisions are also to blame considering the company built a lot of new steel in the previous decade and today, demand for that steel is low because fresh supplies can be easily produced onshore at a fraction of the price. For them to mount a recovery, energy prices would have to climb significantly higher.

So, with Transocean stock at historic lows, is now a good time to invest? Not necessarily. “The credit rating agency Moody’s has it on the list of the energy sector companies most vulnerable to defaulting on debt over the next two years,” says Motley Fool analyst Matthew DiLallo. “Among those with junk-rated credit, it has the most debt maturing during that time frame at $4.3 billion.”

The Motley Fool’s investing gurus David and Tom Gardner concur. They believe “there are ten energy stocks worth investing in today but… Transocean isn’t one of them!”

 

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