HOUSTON, Nov 2, 2006 (Dow Jones Newswires)
The market for offshore rigs is "going to be particularly strong past ... 2011," Transocean Inc. (RIG) chief executive Bob Long said Thursday.
Deepwater exploration projects around the world should soak up all new rigs entering the market, including "speculative" rigs built without a pre-arranged agreement to drill, Long said in a conference call with analysts.
That would be good news for Transocean, the world's largest offshore driller, which has rig orders worth $20.2 billion extending into 2015.
The backlog is the largest in the industry, and has doubled since June 2005.
Many of the new rig orders came from companies flush with cash from rising oil prices, which peaked at $78.40 a barrel on the New York Mercantile Exchange in July.
Even though oil futures now trade at $20 below that price, Transocean hasn't seen any signs that the deepwater exploration boom is abating, Long said.
Most projects make sense for producers down to oil prices of $40 a barrel, he said, echoing statements by some of the world's largest oil companies, including Royal Dutch Shell PLC (RDSB.LN).
Transocean executives noted recent rig orders for shallow-water rigs, known as jackups, from Vietnam, as well as deepwater contracts in India, Mexico and the U.S. Gulf of Mexico.
Long's unqualified optimism erased any lingering questions about his take on the long-term rig market. In a conference call after Transocean released its second-quarter earnings in July, Long said he was concerned that an order for six new rigs by Brazil's Petroleo Brasileiro SA (PBR) could cause a downturn around 2011.
"I'd say even back then I wasn't that concerned about the market," he said, adding that "more interest ... in additional capacity" over the last three months had convinced him that offshore rigs have a bright future.
Transocean reported record quarterly revenues of $1 billion and net income of $309 million, or 96 cents per share, the latest in a string of strong quarters. Profits beat the Wall Street consensus estimate of 71 cents per share, and were up 81% over the previous year.
"This is like a replay of last quarter, only lots, lots better," Dan Pickering, an analyst at Pickering Energy Partners in Houston, said on the call.
Copyright (c) 2006 Dow Jones & Company, Inc.
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