Boston, MA 04/10/2014 (wallstreetpr) – Transocean LTD (NYSE:RIG) is a rig operator. The company owns drilling assets that it gives out on a contract basis to oil and gas companies. It also provides drilling management solutions. The market values the company at $15 billion.
The company is currently facing some of its most challenging moments in business, and there may be no reason to celebrate in the near future. Analysts at Barclays recently observed that the company is facing lower rate momentum. That is to say that revenue growth will be hard to come by for the company. The analysts cut their price target on the stock to $45 per share, down from $54 per share in the previous note. They maintained “overweight” rating on the stock of Transocean LTD (NYSE:RIG). The move to lower the price target on the stock further sent the shares down in the last session as it became clearer that the road ahead was strewed with more challenges than opportunities.
Transocean LTD (NYSE:RIG) operates two business segments in international scale. The company provides contract drilling services whereby it contracts out the mobile offshore facilities to oil and gas companies. Additionally, the company provides management services for drilling companies where it collects daily rates for the duration of the project or it can also charge on the basis of project-completion.
Aging facilities
Over time, contracts have been hard to come by for Transocean and rates have also dropped. The impact in the company’s business can be linked to competition and lack of proper capital expenditure. With drilling projects increasingly becoming sophisticated, oil and gas companies prefer to go for drilling service providers with facilities that match the needs of their projects. That has meant that drilling service providers have to upgrade their fleet in order to win contracts. However, that is the reality that Transocean LTD (NYSE:RIG) failed to get at the earliest opportunity.
All is not lost
It may seem like Transocean LTD (NYSE:RIG) is headed for the depth of the oceans; however, the company can be seen trying to upgrade its fleet in order to attract better rates and more contracts. You may want to stay on the sideline to track the progress.
