Transocean Ltd (NYSE: RIG) dropped after the company announced the award of contracts for two of its harsh environment semisubmersibles in Norway.
Transocean receives two well contracts in Norway.
The company received a two-well contract to the Transocean Barents in Norway, with a start date expected on February 2022. This contract award is around 200 days long and will add approximately $60 million to the company contact backlog. Transocean Norge was also given a four-well contract in Norway, with five one-well options, with drilling set to begin in March 2022. The contract will last around 200 days and will add $56 million to its contract backlog.
Transocean capitalizing on meme craze to raise capital
Transocean is looking to capitalize on the meme stock craze and rising oil prices to raise $400 million through a share offering. Year to date, the company’s stock has gained over 82%. According to the recent securities filing, Transocean will use proceeds from the offering for general corporate purposes such as capital expenditure and debt refinancing.
It seems the worst is over for Transocean, and the rig supplier expects robust growth in the coming years. Most importantly, its $7.4 billion backlog shows consistent demand from customers and gives cash flow and earnings visibility. The company expects its revenue to grow 95% in Q2 2021, which shows its efficiency in converting its backlog into cash and its low revenue loss because of downtime.
The share sale proceeds will bolster Transocean’s balance sheet after managing to get past legal challenges in 2020 to carry distressed debt exchanges that significantly reduced outstanding debt by $1.1 billion. The company won a significant default suit, effectively averting a bankruptcy lawsuit. Although conditions have improved, Transocean is still struggling financially with a total debt of over $7.6 billion and only $1.5 billion in cash and equivalents.