Transocean LTD (NYSE:RIG) reported that a subsidiary of Chevron selected to exercise its contractual option to end the drilling deal for the Discoverer Clear Leader, effective this November, prior to its expiration in next October. As per the contract terms, the company will be compensated via a lump sum payment of around $148 million in deal termination fees, which is the current value of the operating dayrate minus the operating costs per day. The compensation is anticipated to be received in the Q4 2017.
More recently, Transocean released a presentation wherein the company stated that the cost declines in the offshore drilling segment have resulted in a dramatic decline of the breakeven price of key offshore projects. As per the company, the breakeven price for numerous offshore projects has declined to $46 per barrel from $91 per barrel. The biggest contributor for this drop was the drop in the price of floating rigs.
The company’s also released its view on its biggest competition that is the shale industry. Transocean anticipates the shale costs to continue to rise and expects an increase of 20% price inflation in the coming 12 months. Considering the positive case, this can lead to a breakeven price of $46/barrel for shale. However, in the conservative scenario, the breakeven price declines to $43 per barrel. Taking in consideration these numbers, the deepwater environment is expected to remain tough in the coming period.
In the last trading session, the stock price of Transocean gained more than 4% to close the day at $9.77. The gains came at a share volume of 24.76 million compared to average share volume of 15.83 million. After the recent gains, the market cap of firm now stands at around $3.8 billon. The 52-week high of the stock stands at $16.66 whereas the 52-week low is noted at $7.20.