Rising Star Buy: Once More With Transoceanhttp://www.fool.com/investing/general/2011/08/31/rising-star-buy-once-more-with-transocean.aspx Jim Mueller
August 31, 2011
This article is part of our Rising Star Portfolios series.
Deepwater oil driller Transocean (NYSE: RIG ) was the very first purchase I made in my Messed-Up Expectations portfolio. The thesis was pretty simple: Low expectations for growth were priced in because drilling in the Gulf of Mexico was uncertain after the major oil spill last year and Transocean, along with BP (NYSE: BP ) , was tagged in the public's mind as being responsible. Add in a tougher well certification process and uncertainty about financial liability from the spill, and things looked pretty bleak for Transocean.
Yet it has weathered the storm pretty well. First, during its last earnings conference call, management pointed out that all the blow-out preventers (BOPs -- a contributor to the Macondo well disaster) had been recertified on its ultra-deepwater rigs and that activity was picking up in the Gulf of Mexico.
Second, it is seeing increased utilization rates for its ultra-deepwater rigs, as shown in the table below.