Transocean Unit Applies for $350M IPO - Analyst Blog

Transocean Partners LLC – a master limited partnership MLP formed by offshore drilling giant, Transocean Ltd. RIG – has filed for an initial public offering IPO. The MLP intends to list its units on the NYSE under the ticker RIGP. Transocean Partners expects to raise a maximum of $350.0 million from the IPO.

Investors responded positively to the news, with shares of Transocean Ltd gaining 1.37% to close at $46.00 on Jun 23.

Transocean Partners presently has a 51% ownership in three ultra-deepwater rigs. One of the two rigs is now under a long-term deal with oil giant, BP plc BP to operate in the U.S. Gulf of Mexico (GoM). The other two drillships are working for Chevron Corp. CVX – one of the largest integrated energy companies in the world – in the (GoM).  

Switzerland-based Transocean Ltd is the world's largest offshore drilling contractors and the leading providers of drilling management services. In particular, the company is the industry leader in deep sea drilling. Transocean Ltd's state-of-the-art mobile offshore drilling fleet worldwide can function in the most challenging environments, such as the North Sea.

However, the introduction of new and more regulations due to the oil spill has made deepwater drilling activity prohibitively expensive for Transocean Ltd, making many of its projects marginal.

As a result, Transocean Ltd currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.

Meanwhile, one can look at better-ranked players in the oil and gas drilling sector including Pioneer Energy Services Corp. PES. The stock sports a Zacks Rank #1 (Strong Buy).