RIG - Embedded Expectations Analysis - 2020 06 22
Transocean Ltd. (RIG:USA) currently trades at a discount to UAFRS-based (Uniform) assets, with a 0.6x Uniform P/B. At these levels, the market is pricing in expectations for profitability to remain muted, and management may be concerned about their rig fleet, contract terminations, and operational cash flowSpecifically, management may lack confidence in their ability to mitigate net losses and the impact of travel bans on their operations, generate positive operational cash flow, and continue to enter contracts with strong termination compensation terms. In addition, they may have concerns about potential contract termination increases, the disposal of older rigs, and further force majeure situations. Furthermore, they may be exaggerating drilling demand in the Gulf of Mexico and the progress of their Development Driller III (DD3) acceptance testing. Moreover, they may be downplaying concerns about their ability to grow rig supply and expand breakeven blend-and-extend arrangements
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