It has been 12 years since the Deepwater Horizon accident in the Gulf of Mexico. In this video clip from "The High Energy Show" on Motley Fool Live, recorded on March 15, Fool.com contributors Jason Hall and Travis Hoium look at Transocean (RIG 6.46%), the company at the center of the drilling explosion, and its current position in the offshore business.
Jason Hall: First, I'm going to talk about the offshore market. I'm going to share a couple of things. This is an article that I wrote back in May of 2020. It's like the peak of the worst, the trough of the entire oil industry. This was about offshore drillers.
I think the headline says it at all this subsector that turned $10,000 into $77. Not very long after I wrote this article every major publicly traded offshore oil driller except for Transocean and a couple of other unique players had gone bankrupt, right? Like 90% of industry bankrupt that it was the most stunning thing. I wanted to lead off with that because this is a global industry it is really important to that long tail of production that stable baseload of oil that shale just can't meet and we're paying the piper for right now.
I think it's important to mention to you because this isn't something that didn't happen because of the regulatory environment in the U.S. This happened because of the global dynamics of the industry and partly because of the run-up in shale production in the U.S. Because so much shale was being produced and there was a focus on those quick turn opportunities that the long-term investments were not being made. That was a weird mechanic that was happening.
As a result of that here we are today and there's less than 200 offshore rigs operating globally. Again that's a significant reduction from where it was just a few years ago. I think that's created a really good opportunity for Transocean like this is the one that made it. This is the one that just got devastated years before because of the event in the U.S. Gulf Coast near Louisiana with a rig that exploded. What was the name of that rig?
Travis Hoium: Horizon.
Hall: Deepwater Horizon. In a way that forced the company to do some things that put it in a better position and it was making some really smart moves heading into everything that gave it more financial wherewithal to get through this down period when the rest of the industry was just really struggling.
I think even if you look at the stock price today for Transocean you look at their fleet of assets, they're great, harsh environment, ultra-deepwater rigs. You think about things that are again coming out of Europe about expanding drilling in the North Sea areas that have been restricted because of regulatory changes in Europe.
The increased price of oil, the realities of where we are in the system I think it's a really good opportunity for Transocean over really next five-plus years. I think it's going to be a winner. I really do.
