E Weekly Energy Roundup: Offshore Drilling Companies, Dec 11 – 15

The offshore drilling industry continues to slowly recover, as I discussed in a number of recent reports (see: Seadrill Explains Current Offshore Drilling Market Environment, Analyzing Day Rate and Utilization Trends in the Offshore Drilling Industry – October 2017 Edition, Tracking Day Rate and Utilization Trends in the Offshore Drilling Industry – November 2017 Edition, Offshore Drilling: Future Appears Quite Bright Despite Current Weakness). With that said, the financial media continues to publish reports that largely say that the industry is never going to recover. This is in spite of the fact that the industry-wide utilization rate bottomed out in January of this year and has been increasing ever since. For the most part however, the stock market has not yet recognized that the industry recovery, if weak, is underway. As usual for this report series, I have selected six major players in the industry that should largely represent the industry’s market performance as a whole over the past week. 

Transocean  

On Monday, December 11, 2017, Transocean (RIG) opened at $9.91 per share. Despite a gain on Tuesday, December 12, the stock overall declined throughout the course of the week, closing at $9.45 on Friday, December 15. This gives the stock a 4.64% loss over the week. 

Source: Fidelity Investments 

Transocean’s stock also declined fairly sharply over the past two weeks. The security opened at $10.72 on Monday, December 4, 2017 and fairly consistently declined day-to-day until it reached its current price. Thus, the stock handed investors a loss of 11.85% over the two-week period. 

Source: Fidelity Investments 

By far the biggest news item over the past week regarding Transocean is the announcement that Ocean Marine, an indirect subsidiary of Transocean, is being sued by the Wilmington Trust Company. Wilmington Trust is claiming that Ocean Marine is in default of $300 million of outstanding notes due 2028. It is unclear exactly what effect this would have on Transocean as Transocean is not guaranteeing any of these notes. However, should Ocean Marine be forced to pay the entire principal amount outstanding on these notes then it could result in a default of Transocean’s currently unused $3 billion credit facility. Investors may want to keep an eye on this lawsuit over the next few months.