The move is part of a strategy by Transocean to focus on newer rigs in deeper water where there is extremely high demand. Over the past year, long after the Deepwater Horizon accident, Transocean has underperformed rivals Seadrill
The shallow water rigs that Transocean had in its inventory had a negative impact on results and now Transocean will be down to 92 rigs, 29 of which can operate in 7,500 feet of water or more. This focus on the most lucrative side of the market should help improve profitability and growth.
Shallow water's best days are over
The difference between companies focusing on shallow water and deep water couldn't be starker right now. Five of the rigs being sold are currently stacked, or out of service, and the industry has an oversupply of shallow water rigs, leading to losses at shallow water drillers. Hercules Offshore
The sale of assets by Transocean will leverage the company to ultra-deepwater drilling, which is a good thing right now. I like the move and think it can help get Transocean out of the funk it seems to be in.
However, Seadrill already has a sizable percentage of ultra-deepwater rigs. You can find out more about Seadrill, one of the top stocks in drilling, in our premium report on the company. It comes with a year of free updates and much more, so click here to see if the report is right for you.