Presentation on theme: "William Kelly Lesya Kuzmyk Ceida Plasencia Rodrigo Polezel Alex Santos"— Presentation transcript:
1 William Kelly Lesya Kuzmyk Ceida Plasencia Rodrigo Polezel Alex Santos Transocean Ltd.William KellyLesya KuzmykCeida PlasenciaRodrigo PolezelAlex Santos
2 Company BackgroundTransocean Ltd. is a corporation based in Switzerland that provides services, related equipment and crews for offshore drilling of oil and gas worldwide. They are the largest international provider of offshore contract drilling services, owning 136 offshore drilling units. They provide the following services:Contracted drilling servicesDrilling Management ServicesIntegrated ServicesOil and Gas exploration
6 RIG's Competition/New Entrants Main Competitors: Pride International Inc., Noble Corp., and Diamond Offshore Drilling.RIG has the largest drilling fleet in the industry, with a total of 136 mobile offshore drilling units and 10 new ultra-deepwater units under construction.RIG holds 19 of 23 world records for drilling in the deepest waters--drilling in 10,011 feet of water.RIG specializes in Harsh-Environment Drilling--not many other companies have the equipment and personnel to do so.High start-up costs prevent new entrants (Moat).
7 The Market Transocean Ltd. (RIG) P/E: 7.60 Diamond Offshore Drilling Inc.(DO)P/E: 9.91PEG ratio: 0.75 (5 year expected)EPS:Price to Book ratio: 3.74Dividend Yield: N/AProfit Margin: 38.26%Market Cap: 13.81B (US$)Rating: Buy (from Jesup & Lamont on October 23, 2009)Recommendation: 2.7 (1.0 strong buy-5.0 sell)Revenue: 3.64B (US$)Transocean Ltd. (RIG)P/E: 7.60PEG ratio: 0.58 (5 year expected)EPS: (diluted)Price to Book ratio: 1.44Dividend Yield: N/AExpected share price return: 10.8%Profit Margin: 29.98%Market Cap: 29, (US$ m)Rating: Outperform (from Credit Suisse on October 21, 2009)Recommendation: 1.9 (1.0 strong buy-5.0 sell)Revenue: 12.09B (US$)Noble Corp. (NE)P/E: 6.87PEG ratio: 0.63 (5 year expected)EPS: 6.328Price to Book ratio: 1.72Dividend Yield: 0.50%Profit Margin: 45.72%Market Cap: 11.36B (US$)Rating: Outperform (from RBC Capital Markets on October 26, 2009)Recommendation: 1.9 (1.0 strong buy-5.0 sell)Revenue: 3.61B (US$)
8 Supplier PowerRIG contracts companies specialized in the construction of ships and offshore drilling unitsCompanies engaged in the development of these rigs include Daewoo Shipbuilding and Marine Engineering Co. Ltd. (DSME), Hyundai Heavy Industries, Ltd., and Samsung.Each drilling unit costs an average of $283.5 millionNewbuilds such as the ultra-deepwater drill ships are contracted for about $500,000/day
9 Ultra Deep/Harsh Environment Drilling Buyer PowerThe Brand PowerSafe, effective and efficient Known for their deep water and harsh environment explorations"The largest offshore driller"Owns patented structure and Oil from one company's rig is no different than another's; buyers will look for the best price and contract terms Dependable BuyersSet contracts from several months to multiple yearsContracts with 41 different companies from the NOC, IOC and independents such as Shell, Chevron, BPAverage Condition DrillingUltra Deep/Harsh Environment DrillingBuyer has more control over pricesRIG has more control over pricesMore substitutes availableLittle-to-no substitutes availableLess dependentVery dependentLow brand powerStong brand power
10 Threat of Substitute Products To access natural gas and oil resources located under the ocean, use of drilling rigs is necessaryNo viable alternative process Transocean specializes in and derives large bulk of revenue from deep water rigsVery few companies possess technology, expertise and resources to create such specialized rigs As a result, primary substitute product threat faced by Transocean lies with jackups and medium depth rigsMuch easier for competitors to create own rigs that can accomplish same objectives at low depthsConstitute smaller percentage of Transocean's revenue; minimal threat faced
12 StrengthsDominant position in the ultra-deepwater (+4,000 feet) industry with a 35% market share.Stronger cash flows in following years due to lower capexLow debt obligationsRecent development of technologically enhanced Enterprise-Class drillshipsNewbuild program includes three rigs that reach depth 12,000 feet
13 Contract BacklogStrong contract backlog of deepwater rigs, which contributes to 70% of its revenue
14 WeaknessesSmall growth potential due to its large market share in the offshore drilling industry as well as the full usage of its deepwater rigsBelow average returns due to strong backlogSubletting of rigs can lead to a downward pressure to dayratesStacked jackups accounting for 40% of the total jackup fleet by year end of 2009 due to competitive rates in this sector
15 OpportunitiesDue to the recession, investment in oil production and exploration has experienced an overall reductionWith the likelihood of oil prices increasing within the next few years due to sustained demand, utilization of rigs is likely to increaseWith higher oil prices, incentive explore for oil located in the deepest, harshest territories will increaseThese will increasingly require deep-water capable rigs, which Transocean has an advantage inMay seek to acquire competitors, maintain technological dominance
16 ThreatsInternational laws and U.S. Coastal Laws may hamper drilling on certain locationsProfits dependent on weather conditions, ie. hurricanes, severity of winter.Worldwide political events may impact revenueAdvancement of competitor technology could detract from the core competence (deep water drilling)Volatility in oil prices could seriously affect demand for oil rigsAlternative energy sources may reduce future demand for oil rig utilization
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