1. Transocean Ltd. (NYSE:RIG)
Share Price as of October 11: $4.25
Number of Hedge Fund Holders: 42
Transocean Ltd. (NYSE:RIG) is the world’s largest offshore drilling contractor based on revenue, based in Switzerland, with offices in 20 countries. It owns and operates a fleet of offshore drilling rigs, which are used to explore and develop oil and gas fields in deepwater and ultra-deepwater environments. Its services are essential for the energy industry, as they help to extract valuable natural resources.
The company reported strong financial results in Q2 2024, with contract drilling revenue reaching $861 million, recording an improvement of 18.11% as compared to the year-ago period. It achieved a revenue efficiency of 97% and signed several high-value contracts in the US Gulf of Mexico, including a two-well contract with Beacon Offshore Energy at $580,000 per day and a 3-year contract with BP at $485,000 per day. These contracts are expected to contribute significantly to cash flow and help the company deleverage.
It recently secured two new contracts: a one-year contract for the Deepwater Atlas with BP in the US Gulf of Mexico, starting in Q2 2028, expected to add $232 million to the company’s backlog, and another 300-day program with Reliance Industries Limited for the Dhirubhai Deepwater KG1 for 6 wells offshore in India, starting in Q2 2026, expected to add $123 million to its backlog.
The company has secured contracts in Brazil and Norway that extend the firm duration of its rigs through 2025. Contract wins position it well to capitalize on the anticipated growth in global offshore drilling, with projections from Rystad Energy indicating that offshore exploration investments could more than double by 2027. Transocean Ltd.’s (NYSE:RIG) solid financial performance, coupled with increasing day rates, makes it an attractive investment.
Carillon Scout Mid Cap Fund stated the following regarding Transocean Ltd. (NYSE:RIG) in its fourth quarter 2023 investor letter:
“Transocean Ltd. (NYSE:RIG), a leader in deepwater offshore drilling rigs, was next among the losers in a generally weak energy group. Oil fell from recent highs, partially driven by Mideast tensions, and this hurt sentiment in the energy sector despite little change in offshore rig day-rate pricing or long-term fundamentals.”
While we acknowledge the growth potential of Transocean Ltd. (NYSE:RIG), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RIG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
