Transocean, Inc. (RIG)

freefall51 (64.47) Submitted: 2/23/08 12:31 PM : Start Price: $137.96 RIG Score: 11.24

If I were to choose one stock - just one - this is it. RIG has more business in front of them that they can handle. Everything falls in place.

The world is demanding more energy. Alterative energy is not keeping up the pace. So oil will get tighter, even if the US falls in recesssion. Fast growing China and India will pick up the slack.

Most big oil finds are now out in the deep sea. There is a race among nations going on for mineral rights in deep sea water for a reason. Such as Russia is claiming the rights for the Antarktis.

RIG has terrific market position in deep sea drilling. Competition is not a problem, as speedy availability for their deep sea rigs is more important than (their high) pricing. RIG have a deliberate, disciplined and opportunistic expansion program, geeting out of the crowded shelf drilling business and into more profitable deep sea.
They invest on customer demand visible in the next 4 years. Their service contracts are inflation escalated from the order for a rig to a shipyard. Their new deepwater rigs cost around 750 mm$, with service fees running 500 - 600 grand a day or 180 mm$/yr or more. Payback is around 4 years, about the lenght of their initial contract terms. The rest of the lifetime of those rigs is pure fun. Rigs can be used for 30 years or so. Their total debtload ~ 17 B $ is already covered by the contracted cash flow backlog over the next years. The continuing weak $ and the extensive international exposure will help too. The stock is cheap with a terrific growth rate particularly after the integration of Global Santa Fe.

What is not to like here?

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