October 5, 2017

RIG – Market expectations are for Uniform ROA to remain weak, but management’s confidence about long-term supply, their backlog, and demand implies this may be unwarranted


  • Transocean Ltd. (RIG:USA) currently trades at historical lows relative to UAFRS-based (Uniform) Assets, with a 0.5x Uniform P/B, implying bearish expectations for the firm. However, this may be unwarranted given management’s confidence about long-term supply, their backlog, and demand
  • Specifically, management is confident that the tightening supply should motivate customers to invest capital in offshore exploration and development, and about the sustainability of increasing floater fixture executions. Additionally, they are confident that their backlog remains industry-leading at $10.2bn, and that the demand for the Nautilus remains robust. As such, expectations for Uniform ROA to remain below-cost-of-capital levels going forward appear too bearish, and multiple expansion and equity upside may be warranted

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