Boston, MA 10/23/2013 (wallstreetpr) – Transocean LTD (NYSE:RIG) is set to replace Dell Inc. (NASDAQ:DELL) in S&P500 on October 28 following the privatization of Dell. This will see some upward movement in Transocean’s share prices as S&P500 index funds will have to invest in the company. The stock of the company rose by 5.97% on October 22 to close at $49.35 per share. The volumes were also higher at 17.37 million as compared to the average volumes of 3.12 million. The upward movement is expected to continue for some time, but investors should tread carefully.
Transocean is a leading provider of offshore drilling management services to the oil exploration industry. With oil getting difficult to find, oil drillers have to drill at greater depths and in very harsh conditions to locate and extract oil. Coupled with the stringent regulations introduced after oil spills, deepwater drilling is getting very expensive. Transocean is focusing on this segment to take advantage of the rising prices. It is placing greater emphasis on high specification rigs; rigs which can operate in the harshest environment, reach greater depths, and also reach hard-to-reach places. The company is also disinvesting its non core assets. The strategy appears to be well placed; reports suggest that in 2012, 12 billion barrels of oil equivalent were discovered at depths of more than 5000 feet as compared 6 billion barrels of oil equivalent between 1,300 and 5,000 feet, and 3 billion at depths less than 1,300 feet. The rates for this segment are also favorable with day rates in the range of $550,000 to $600,000. These rates have increased by more than 50% in the last two years itself. Transocean has already signed a five year contract with Chevron U.S.A Inc., a subsidiary of Chevron Corporation (NYSE:CVX) for the under-construction ultra-deepwater drill ship at a day rate of $599,000. The dynamically positioned drillship is expected to be delivered in the second quarter of 2016.
The company can be looked at as investment in the long-term and investors should pick up stocks at dips in the share prices.
