Although the outlook for ultra-deepwater drilling demand remains strong, Transocean could see increasing competition going forward due to the addition of new ultra-deepwater drilling capacity in the industry.
Among the various offshore drilling practices, ultra-deepwater drilling is the most expensive and technically challenging method since it involves drilling at water depths of over 5, 000 feet.
Transocean is looking to navigate these challenges by concentrating on high specifications sectors such as ultra-deepwater and harsh environment drilling where the competitive intensity is considerably lower.
We believe that if the company continues the trend of strengthening its deepwater and ultra-deepwater assets, its average daily revenues per rig and the gross margins of its contract drilling business will be positively impacted going forward.
Recent discoveries off the coasts of West Africa, Brazil and a resurrection of drilling activity in the US Gulf of Mexico have spurred demand for ultra-deepwater rigs.