What Is Wrong with #Transocean $RIG?
- stevenrubis
- Feb 20, 2024
- 2 min read
Capital Markets / Investor Relations in Two Minutes or Less
What is the Problem with #Transocean $RIG?
Never be the public company executive that sells millions at the top!
#Transocean represents a leading offshore drilling company.
Most will remember the company as the original meme stock due to the environmental disaster involving Deepwater Horizon back in 2010.
Anyone who talked to me at #iConverge at the Gies College of Business - University of Illinois Urbana-Champaign College of Business in September of 2023, knows that I am extremely bullish on the long-term prospects of #Transocean.
What Can #Transocean’s Current Situation Teach Other Public Management Teams?
Key Positives:
1. Secular bull market for offshore drilling
2. Book value of $13 per share and stock is sub $5
3. EBITDA is expected to double from 2023 to 2024
4. Management expects to de-lever by $3B-$3.5B over three years
5. Debt trades at par!
6. Analyst Day when stock is sub $5!
Key Issues:
1. CFO sold millions at the top and stock is more than 50% lower from his sales
2. Backlog additions were minimal in 4Q23
3. Day rates remain below $500K per day despite management expectations
4. No cold stack asset reactivations
5. January Capital Markets Day not webcast and focused on 2026!!!!
A company’s stock price represents a function of how management executes on key catalysts.
In the case of Transocean, management has yet to execute on two primary catalysts:
1. Print a day rate for an asset(s) at or above $500K, and
2. Reactivate a cold stacked asset.
The lack of execution illustrates why the stock is sub $5.
Execution on one or both catalysts should send shares significantly higher.
At this point, RIG management is suffering from a credibility issue due to stock sales and a lack of execution on key catalysts over the past several months.
Public company management teams seeking a Hall of Fame career need to remember the following:
1. You have to execute on the business each and every quarter. There are no quarters off.
2. Execute on the balance between any low price and surge pricing.
3. Maintain credibility!
No one wants to be the guy or gal that sold millions at the top, the stock is 50% lower six months later, and same guy or gal is trying to talk a bullish investment thesis to investors.
Credibility matters if you want your stock price to experience a sustainable increase over a long period of time.
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