Transocean (RIG): Drilling for deepwater gains

"All ten rigs the company has under construction are deepwater rigs, with eight qualifying as ultra-deepwater rigs.

"In its fourth-quarter 2008 earnings report, Transocean stated that it's seeing considerable weakness in its jackup business in all parts of the world. It also has two midwater floaters that have already been idled, and it has indicated more rigs are likely to suffer the same fate.

"The real value in Transocean is its massive deepwater fleet, which has, for the most part, already been contracted under long-term deals. In fact, all ten of the rigs Transocean already has under construction have been contracted for work as soon as they're completed and put into service.

"Transocean has a $39-billion backlog of rig contracts. These consist mainly of deepwater rigs that have already been contracted under firm deals but haven't yet completed their prescribed work.

"That backlog is off about $2 billion from the levels the company reported last quarter but represents a solid base of revenues for Transocean regardless of the path of commodity prices. Given this huge base of locked-in cash flow, the company has been repurchasing stock and paying down debt."

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