Stressed Out: Driller Transocean Strikes Profit

 | Feb 24, 2016 | 5:58 PM EST
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This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

Investors have likely gotten used to a sea of parentheses when combing through the earnings releases of energy companies, but on Wednesday, Transocean (RIG) posted earnings of $1.66 a share on revenue of $1.85 billion for the quarter. (To be sure, revenue was down 17% from $2.23 billion in the fourth quarter of 2014.)

Shares of the Switzerland-based offshore driller shot up over 8% in after-hours trading on the report but fell shortly after, while still remaining in positive territory. Earlier on Wednesday, Real Money's Bruce Kamich said investors may want to "stay defensive" on Transocean given the bearish movement in its charts.

"I would like to thank the Transocean team for delivering very solid operating and financial results throughout an extremely challenging year for our industry," CEO Jeremy Thigpen said in the company's earnings release. "While predicting the timing of an industry recovery is nearly impossible, we take comfort in knowing that our strong liquidity, combined with our market-leading backlog, will sustain us through this downturn."

Indeed, the market has been challenging for Transocean. On Tuesday, the company reported that it had received an early termination notice from Esso Exploration Anglo for its GSF Development Driller. The contract was expected to end in May and its terms do not permit Transocean to receive compensation for the remaining term. Transocean said it has no other contracts in its backlog that allow "uncompensated cancellation for convenience." It was the second early termination the company announced this month. In December, Royal Dutch Shell (RDS) and Statoil (STO) terminated their contracts with Transocean early.

In the fleet status report Transocean released earlier this month, 21 of its 61 rigs were "stacked," meaning they are expected to be inactive for an extended period, and six of its rigs were "idle," or between contracts. In October, Transocean reported that 14 of its rigs were stacked and eight were idled. 

Transocean will provide more details on its results on Thursday morning.

For more on Real Money's 20 distressed companies to watch:

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: Chesapeake Energy Earnings Herald Rough 2016

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