Drilling activity and demand for drilling rigs are both down. As of early May Transocean (RIG) reported that it had stacked—that is temporarily pulled out of service—nine rigs with the definite possibility of stacking another five to 10 in 2009. Day rates for its jackup drilling rigs had tumbled 40% from their peak in 2008. But that’s actually a pretty decent performance. In the collapse from 1997-1999 rates fell by 70%. The rebound in drilling activity isn’t at hand—although the climb in oil prices back to $70 a barrel sure helps—but with 136 ocean drilling rigs (including 39 deepwater rigs) Transocean is by far the best positioned company in the world to profit from a post-recession expansion of deep water drilling. The replacement value — what it would cost to duplicate Transocean’s biggest-in-the-industry fleet of deep-water rigs today — comes to $123.97 a share. So at a recent price of $75 a share, a patient value investor is getting about $1.67 a share in assets for $1. When will the stock’s price recognize that value? I’d guess 2010. As of July 1, I’m upping my target price to $85 a share by March 2010 from the prior $74 a share by December 2009. (Full disclosure: I own shares of Transocean in my personal portfolio.)
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RIG has climbed but plateaued since successful capping- any thoughts on hold it or dump?
RIG went down to 49 since the oil spill. Any thoughts since your last upgrade on March 2010??? Thanks
this is one of the anomolies in Jim’s reccos – has happened not frequently but is a real glitch for those of us who bought on the original recco and then are stuck. Jim does not have this downward revision in his rules of the road.
at the time of the original post 1st Aug 2008, the sp was 137
Can you update your portfolio page? It says you bought RIG for $137 with a target price of $105. When you bought it your initial target price was $85 if I remember correctly; so I doubt it was purchased for $137 a share.
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