Transocean (RIG) Following New Backlog Wins Is The Recovery Story Still Undervalued

Transocean (RIG) is back in focus after securing formal approval of a previously announced Equinor agreement worth about US$1.0b in firm backlog, along with a new US$62 million drilling contract with Shell in Norway.

Despite the fresh contracts, Transocean’s share price has moved in fits and starts. The 7-day share price return stands at 6.58%, while the 30-day share price return has slipped 2.82%. At the same time, the year-to-date share price return of 29.95% and 1-year total shareholder return of 78.90% point to momentum that has built over the past year as investors reassess both earnings potential and risk around the backlog story.

Scan beyond Transocean’s backlog story and evaluate other offshore and energy plays with resilient balance sheets using our curated list of solid balance sheet and fundamentals (25 results)

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Bulls see Transocean’s fresh US$1.1b backlog as validation of the recovery story. Bears point to the recent wobble in the share price and history of losses. Which case does the current valuation lean toward?

Most Popular Narrative: 39% Undervalued

At a last close of $5.51 compared with a narrative fair value of $9.00, Transocean is framed as materially mispriced, with the focus squarely on rig quality, leverage and the pending Valaris merger rather than short term contract wins.

Thirty-three drillships out of roughly 89 on earth. About 37% of world supply. The rest of the industry combined owns fewer than Transocean alone.

See why 9 investors see Transocean as 39% undervalued.

Result: Fair Value of $9.00 (UNDERVALUED)

Still, the Transocean story can crack if regulators delay or block the Valaris deal, or if offshore dayrates soften before debt meaningfully comes down.

Find out about the key risks to this Transocean narrative.

Next Steps

If the bullish tone around Transocean feels persuasive, pressure test it with the raw numbers and form your own view. To see what optimism is built on, take a closer look at the 2 key rewards.

Looking for more Transocean investment ideas?

Do not stop your research with Transocean alone. The market offers plenty of other stories that could suit your goals if you know where to look.

• Target potential mispricings by scanning companies that combine strong fundamentals with appealing valuations using the 29 high quality undervalued stocks.
• Prioritize stability by reviewing a 31 resilient stocks with low risk scores that focuses on resilient businesses with lower risk profiles than the broader market.
• Hunt for tomorrow’s potential standouts by filtering through 20 high quality undiscovered gems before they gain wider attention.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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