7 Best Oil Stocks under $20

3. Transocean Ltd. (NYSE:RIG)

Number of Hedge Funds Holders: 42

Share Price: $4.54

Transocean Ltd. (NYSE:RIG) is a leader in offshore drilling services, providing rigs, mobile units, and equipment to drill oil and gas wells worldwide. It operates a fleet of offshore drilling units, including ultra-deep and harsh environmental floaters, serving both integrated energy entities and government-owned companies.

Transocean Ltd. (NYSE:RIG) reported revenue of $861 million for Q2 2024, resulting in an adjusted EBITDA of $284 million. It delivered EBITDA margins of 33% for the quarter. The company posted a loss of $123 million, or $0.15 per share, for the quarter, due to delays in transitioning the Deepwater Atlas (Transocean’s drillship) to its higher 20K PSI (pounds per square inch) day rate and the delayed start of the KG1 in India, both of which negatively affected revenue. However, Transocean achieved 97% revenue efficiency for the quarter, attributed to strong fleet management, despite the challenges of mobilizing 40% of its fleet across multiple jurisdictions worldwide.

Furthermore, the company secured several new high-value contracts in the quarter, which bolsters growth prospects. Beacon Offshore awarded the Deepwater Atlas a two-well contract with a leading rate of $580,000 per day. This was further enhanced by a rate of $650,000 per day for advanced 20,000 PSI completions. In another milestone, BP signed a 3-year contract for Transocean’s Deepwater Invictus at $485,000 per day. These deals not only increase the contract backlog but also fill critical gaps in the company’s schedule, particularly in the U.S. Gulf region.

Despite securing new contracts, Transocean Ltd. (NYSE:RIG) faced operational challenges, such as delays in Deepwater Atlas transitioning to a high rate of 20k psi operations. This affected the company’s contracted revenues for the quarter. Moreover, a customer delay in the KG1 rig in India further reduced revenue. Thus, the company’s share price declined by 10% over the past month.

However, Transocean Ltd. (NYSE:RIG) countered these issues by commencing the Deepwater Aquila contract in Brazil to mitigate these setbacks. The company is also optimistic about its offshore drilling with contracts in Brazil and West Africa.

As of Q2 2024, 42 hedge funds have collectively invested $490 million in the company, according to Insider Monkey’s database, placing it on our list of the best energy stocks to buy.