Business Case Study: Transocean Ltd.
Transocean Ltd.
Transocean Ltd. reported its third quarter results on 4th November. From the numbers mentioned in the press release itself we can realise that Transocean has got good hold of the situation. For the 3 months ended 30th September, the company reported revenues of $ 1.61 billion, down $ 276 million from that for the second quarter of the current year. Lower fleet utilization and a decline in other revenues related to contract termination fees recognized in the second quarter are the primary reasons for the decline in revenues.
Cost reduction is the mantra of the oil industry right now. Following suit, Transocean reduced activity which brought down its operating and maintenance expenses were $ 880 million during the last reported …show more content…
For example, in July it redeemed the 4.95 % senior notes due November with a cash payment of $ 904 million and in the third quarter, repurchased $ 292 million of debt, at a cost of $ 274 million. Because Transocean is expected to generate a handsome cash inflow in the following quarter, the outflow due to debt reduction will be more or less offset. And when the company is not looking for big investments at present, the best use of cash would be for debt reduction.
Oil Industry Outlook and Effect on Transocean:
The OPEC is done with its meeting at Vienna. And the outcome of the meeting is not in favour of oil prices. The OPEC has raised the ceiling of its output to 31.5 million barrels per day (bpd) while it was expected by many to only maintain its ceiling at 30 million bpd, despite pressure from poorer members of the cartel for a cut in output to prop up the price of oil. It has gone a step ahead of that expectation. That was a mere acknowledgement to the actual levels of production i.e. 31.77 million (bpd) from 31.64 million bpd in October.
But I think a higher ceiling won’t divert the attention of oil producing companies like Cheveron and ConocoPhillips who have long decided to cut costs by putting new projects to hold. In the process, high-cost, high-risk deep-water projects are the first ones to be
Transocean Ltd. reported its third quarter results on 4th November. From the numbers mentioned in the press release itself we can realise that Transocean has got good hold of the situation. For the 3 months ended 30th September, the company reported revenues of $ 1.61 billion, down $ 276 million from that for the second quarter of the current year. Lower fleet utilization and a decline in other revenues related to contract termination fees recognized in the second quarter are the primary reasons for the decline in revenues.
Cost reduction is the mantra of the oil industry right now. Following suit, Transocean reduced activity which brought down its operating and maintenance expenses were $ 880 million during the last reported …show more content…
For example, in July it redeemed the 4.95 % senior notes due November with a cash payment of $ 904 million and in the third quarter, repurchased $ 292 million of debt, at a cost of $ 274 million. Because Transocean is expected to generate a handsome cash inflow in the following quarter, the outflow due to debt reduction will be more or less offset. And when the company is not looking for big investments at present, the best use of cash would be for debt reduction.
Oil Industry Outlook and Effect on Transocean:
The OPEC is done with its meeting at Vienna. And the outcome of the meeting is not in favour of oil prices. The OPEC has raised the ceiling of its output to 31.5 million barrels per day (bpd) while it was expected by many to only maintain its ceiling at 30 million bpd, despite pressure from poorer members of the cartel for a cut in output to prop up the price of oil. It has gone a step ahead of that expectation. That was a mere acknowledgement to the actual levels of production i.e. 31.77 million (bpd) from 31.64 million bpd in October.
But I think a higher ceiling won’t divert the attention of oil producing companies like Cheveron and ConocoPhillips who have long decided to cut costs by putting new projects to hold. In the process, high-cost, high-risk deep-water projects are the first ones to be