Transocean (RIG) up 3.3% since last earnings report: can it continue?
IIt’s been about a month since Transocean’s (RIG) last earnings report. The shares rose about 3.3% during this period, outperforming the S&P 500.
Will the recent positive trend continue until its next earnings release, or is Transocean due to a setback? Before we dive into the recent reaction from investors and analysts, let’s take a look at its latest earnings report to better understand the important catalysts.
Transocean posts a larger than expected loss in the first quarter
Transocean reported an adjusted net loss of 28 cents per share for the first quarter of 2022, higher than Zacks consensus estimate of a loss of 22 cents. This underperformance reflects lower revenue compared to the year-ago quarter and weaker-than-expected utilization, which at 53% missed the consensus mark of 54%.
Additionally, RIG’s bottom line deteriorated from the previous year’s loss of 19 cents.
The offshore drilling facility’s total adjusted revenue of $615 million beat Zacks’ consensus estimate of $605 million. However, adjusted revenue fell 4.3% from the previous year’s figure of $653 million.
Breakdown of revenues by segment
Transocean’s ultra-deepwater floats contributed 66.5% of total contract drilling revenue, while harsh environment floats accounted for the remaining 33.5%. In the first quarter of 2022, revenues for Ultra-deepwater and Harsh Environment floats totaled $390 million and $196 million, respectively, compared to reported figures for the corresponding quarter of $436 million and $217 million a year ago. a year.
Revenue efficiency was 94.9%, higher than the 94.5% reported sequentially, but lower than the previous year’s value of 97.4%.
Daily rates, usage and backlog
Average daily rates in the quarter fell to $334,500 from the $373,700 level a year ago, but topped Zacks’ consensus estimate of $319,000. RIG saw a sharp year-over-year increase in average earnings per day from harsh environment floats from $377,800 to $399,100, but a decrease in the same from ultra-deep floats from $371,600 to quarter of the previous year at $305,600. Overall fleet utilization was 52.7% in the quarter, up slightly from the 52.6% utilization rate in the prior year period.
Transocean’s backlog of $6.1 billion for the quarter reflects a sequential decline from $6.5 billion last quarter.
Costs, Capex & Balance sheet
Operating and maintenance costs decreased to $412 million from $435 million a year ago. The company spent $106 million on capital investments in the first quarter. Cash used in operating activities was $1 million. The company had cash and cash equivalents worth $911 million as of March 31, 2022. Long-term debt was $6.37 billion, with a debt-to-capitalization ratio of 36. 4% on the same date.
For the second quarter of 2022, this offshore drilling contractor expects adjusted contract drilling revenue of $705 million and second quarter operating and maintenance expenses are projected at approximately $460 million. For the full year 2022, Transocean forecasts adjusted revenues of approximately $2.7 billion and operating and maintenance expenses of $1.7 billion. Its general and administrative expenses for the second quarter are expected to be around $50 million and between $180 and $185 million for the full year. Net interest expense for the second quarter is expected to be approximately $98 million and approximately $395 million for 2022. The cash projection includes estimated 2022 capital expenditures (capex) of 1.3 billion dollars, of which 1.2 billion dollars related to new construction and 80 million dollars for maintenance investments. .
Finally, cash taxes are expected to be approximately $10 million for the second quarter and approximately $28 million for the year.
How have the estimates changed since then?
It turns out that the review of the estimates has tended to increase over the past month.
The consensus estimate changed by 5.36% due to these changes.
Currently, Transocean has a low growth score of F, but its Momentum score is faring much better with an A. Tracing a somewhat similar path, the stock has been assigned a B rating from the side of value, placing it in the second quintile for this investment strategy.
Overall, the title has an overall VGM score of C. If you’re not focused on a strategy, this score is the one you should be interested in.
Estimates have been on the rise for the stock, and the magnitude of this revision looks promising. Notably, Transocean has a Zacks rank of #3 (Hold). We expect the title to return online in the coming months.
Performance of an industry player
Transocean is part of the Zacks Oil and Gas – Drilling industry. Over the past month, Nabors Industries (NBR), a stock in the same sector, has gained 7.1%. The company released its results for the quarter ended March 2022 more than a month ago.
Nabors reported revenue of $568.7 million in the last reported quarter, representing a year-over-year change of +23.2%. EPS of -$13.88 for the same period versus -$20.16 a year ago.
For the current quarter, Nabors is expected to post a loss of $6.70 per share, indicating a +62.8% change from the prior year quarter. The Zacks consensus estimate has changed -7.5% over the past 30 days.
Nabors has a Zacks rank of No. 3 (Hold) based on the general direction and magnitude of the estimate revisions. Additionally, the stock has a VGM score of B.
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