Transocean Posts $1 Billion Impairment for Four Floaters
On Wednesday, leading offshore rig operator Transocean posted an impairment totaling $1 billon from writedowns for four deactivated floaters and goodwill, leading to a net loss of $20 million for the second quarter despite strong revenue numbers.
Transocean decided to recycle four more of its rigs - Deepwater Discovery, Deepwater Frontier, Deepwater Millennium and Songa Trym - last quarter, creating a $560 million charge as it took the assets' previous value off its books. It has now retired 43 rigs since the start of the offshore downturn, and has focused its high-grading program on retaining ultra-deepwater and harsh-environment rigs. The writedown was offset by earnings from newly-acquired Songa Offshore and from the Deepwater Poseidon, a new drillship that has just begun operations.
Now that the one-time charges are accounted for, Transocean's outlook looks good, says president and CEO Jeremy Thigpen. The drilling giant took in $780 million revenue for the quarter, and it has signed new contracts worth an additional $400 million. The firm's backlog now stands at nearly $12 billion.
“The second quarter marked the first full quarter of operations for all five of our newest ultra-deepwater drillships, as well as the four recently acquired CAT-D harsh environment semisubmersibles from Songa," said Thigpen. "Our industry-leading floater fleet . . . positions us well at a time when our optimism about the market's recovery is growing."
Offshore shows signs of gradual recovery
Industry analysts predict an uptick in the offshore sector over the course of the next year, with more drilling contacts signed and more exploration activity in the forecast. Paal Kibsgaard, the CEO of oilfield services company Schlumberger, predicted in a recent earnings call that oil firms will have to resume drilling in order to sustain production volumes after three years of relative quiet.
"We are starting to see some uptick in the second quarter in terms of exploration rig count, which was up 22 percent sequentially and up seven percent year over year," Kibsgaard said, suggesting that spending would continue to rise in 2019. Lorenzo Simonelli, the CEO of competing service firm Baker Hughes (a GE company), echoed Kibsgaard's optimistic outlook.