S&P Raises Transocean Offshore Ratings

Friday, January 07, 2000
Standard & Poor's raised its ratings for Transocean Offshore Inc., renamed Transocean Sedco Forex Inc. (See chart page 2, related story page 8) At the same time, Standard & Poor's assigned to the company an 'A-1' short-term corporate credit rating, an 'A-1' rating for its $500 million commercial paper program, and a single-'A' rating for its $400 million term loan maturing December 2004. The company's ratings are removed from CreditWatch with positive implications, where they were placed on July 12, 1999, upon the announcement that un-rated Schlumberger Ltd. would spin off its marine drilling unit and combine it with Transocean. That merger was completed on Dec. 31, 1999. The outlook is stable. The ratings for Houston, Texas-based Transocean Sedco Forex reflect the company's strong business position as one of the world's largest and most technically advanced oil and natural gas offshore contract drillers, with a large, well-positioned premium rig fleet; relatively clear revenue visibility; and a strong balance sheet. These strengths are somewhat offset by the financial risks inherent in the contract drilling industry, which relies on highly cyclical capital spending patterns of exploration and production (E&P) companies. The merger creates a company with a world-class fleet of 75 drilling rigs (47 semisubmersibles, seven deepwater drillships, 17 jackups and four tender rigs) that operate in all major international petroleum E&P regions. Particularly, a large fleet of high-specification deepwater and harsh environment rigs (Transocean Sedco Forex controls roughly one-third of the world's floating offshore rig supply and 30% of rigs capable of drilling in more than 3,000 feet of water) conveys an exceptionally strong business position in a drilling segment characterized by long-term, premium rate contracts and stronger than average rig utilization. A global alliance with oilfield services heavyweight Schlumberger further enhances the company's overall business position. Mid-1998 to mid-1999 was a period of extremely low oil prices that prompted most E&P companies to severely reduce planned outlays for drilling services. Predictably, Transocean was less severely impacted than many drillers as its premium fleet largely continued working under competitively priced contracts with top operators. However, as certain contracts expire the company faces repricing risk which could weaken profitability. Despite recent commodity price strengthening, drilling is experiencing a characteristic recovery lag, and rig utilization and day rates are not expected to materially rebound until mid-2000 or later. Still, with about $1.1 billion in contracted backlog, revenue visibility for Transocean's more sophisticated equipment remains strong. In addition, Sedco Forex's fleet gives the company greater exposure to more volatile, but currently the most rapidly improving, shorter-term drilling markets. Still, Standard & Poor's expects profitability and cash flow protection measures to remain somewhat low for the rating category until market conditions fully recover, with earnings before interest, taxes, depreciation, and amortization interest coverage averaging above 9 times (x). The company is on time to complete its fully contracted new-build program (three drillships initiated by Transocean; three semisubmersible and one jack-up rig initiated by Sedco Forex) by the third quarter of 2000. Ample cash flow from an expanded fleet should adequately meet low fixed charges, fund remaining construction costs, and achieve modest deleveraging from an already low 25% total debt to total book capital. While Transocean assumed Sedco Forex debt in the merger, the net post-merger effect was a slight deleveraging for Transocean.
Maritime Reporter November 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Hiab Switches to Dealer-based Distribution in Mexico

Hiab, part of Cargotec, and Consorcio Industrial Puebla S.A.P.I. de C.V. (CIPSA) have signed an agreement regarding a long-term distribution partnership in the Americas region.

Mermaid Wins Subsea Contract in Gulf of Thailand

Mermaid has secured a 2-year contract for its dive support vessel, ‘Mermaid Commander’, to provide subsea construction support in the Gulf of Thailand for a

General Dynamics NASSCO Celebrates Opening of Bremerton Facility

General Dynamics NASSCO celebrated the grand opening of its new location in Bremerton, Wash., yesterday. The facility will support the company’s recently-awarded contract to repair and maintain U.

Finance

Transpacific Box Shippers Plan Freight Rate Rise

A container shipping organisation urged companies on Wednesday to raise Asia-U.S. freight rates by at least $600 per 40-foot container (FEU) from Jan. 15, corresponding to an increase of 26.

Container Volumes on the Rise in South Carolina

Container volume up 13 percent at South Carolina Ports Authority; Charleston benefiting from federal appropriations    The SC Ports Authority announced another

Liebherr Expects Turnover Dip

For the 2014 business year, the Liebherr Group is currently anticipating an overall turnover of 8,866 million euros (2013: 8,964 million euros). In the area of construction machines and mining,

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Pipelines Pod Propulsion Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2283 sec (4 req/sec)