While Transocean endured another quarter of losses, the company doesn’t need to be haunted by ghosts of quarters past, as a robust market plus increasing rig counts and day rates point to a successful fourth quarter and 2024.

The company suffered from a loss in revenue in the third quarter, but Transocean argues that the company is not in the grave but in the early stages of a multi-year upcycle.

“With our fleet of the most capable high-specification ultra-deepwater drillships and harsh environment semisubmersibles, Transocean is uniquely positioned to capitalize on current and future opportunities,” CEO Jeremy Thigpen said in a press release.

In the third quarter of 2023, Transocean had an adjusted net loss of $280 million, according to its Oct. 31 earnings call. Total contract drilling revenues were $713 million, down from the $729 million recorded in the second quarter of this year.

These decreases were heavily influenced by the Transocean rig fleet, which suffered from idle time on three ultra-deepwater floaters as well as four rigs undergoing contract preparation and mobilization activities, leading to lower third quarter revenue.

But even with revenue decreasing for the quarter, Transocean’s rig fleet appears to be hanging on.

“In April of 2022, 12 of our rigs were contracted for durations greater than 12 months,” Thigpen said during the earnings call. “Today, 17 of our rigs are contracted for durations greater than 12 months, a 42% increase, 15 are contracted for greater than 24 months, a 150% increase, and 13 are contracted for more than 36 months, a 160% increase of our 2023 contracted backlog.”

In India, the Deepwater KG1 received a 60-day extension with its current customer Reliance at a rate of $348,000 per day, as well as a 21-month contract with ONGC at a rate of $347,500 per day. The Deepwater Invictus completed a plug & abandonment well at a rate of $440,000 per day this quarter. In Brazil, the new build ultra-deepwater drillship Deepwater Aquila was awarded a three-year contract with Petrobras at a day rate of $448,000.

 With the Aquila in its fleet, Transocean now operates eight of the 12 globally competitive 1400 short-ton hookload dual activity ultra-deepwater drillships in the world.

“Since the fourth quarter of 2022, our ultra-deepwater fleet average day rate has increased by approximately 33% to $416,000 per day. By the third quarter of 2024, based upon current firm backlog, we expect this average rate to increase to $437,000 per day,” Thigpen said.

Operating and maintenance expense was $524 million, up from $484 million in the prior quarter. This change was caused by higher shipyard costs and contract preparation for seven rigs and a full quarter of operations from Deepwater Titan and Transocean Norge. Cash used in operating activities decreased from $201 million in the second quarter to $44 million during the third quarter of 2023, as a result of the increased cash disbursements for preparing and mobilizing seven rigs for contracts and timing of interest payments.

While more money is being used by Transocean, its rig fleet is still profitable—not just because of rising dayrates, but because of the tremendous value of their backlog.

Transocean has added $6.8 billion of backlog within the last 22 months, bringing the total amount of their backlogged contracts to $9.4 billion.

Looking at each region, the Transocean rig fleet is heavily involved in operations across the globe. In the U.S. Gulf of Mexico, there is a “steady stream of demand” for short-term programs with independent operators and a solid market for the limited supply of high specification ultra-deepwater assets, said Thigpen.

“For the fourth quarter of 2023, we expect adjusted contract drilling revenue of approximately $760 million based on an average fleet-wide revenue efficiency of 96.5%,” Mark Mey, executive vice president and CFO of Transocean, said during the earnings call. “This quarter-over-quarter increase is mainly due to higher day rates on KG1, Corcovado, Mykonos and Petrobras 10,000; more operating days than at other service periods in the third quarter and expected commencement of the KG2 contract in the fourth quarter.”

Brazil is also a large market for Transocean, as they already have the Aquila drillship in the area. Active rig count in the region is expected to hit 36 next year. Africa and the Mediterranean are also growing markets for the company, as there is an “excess of 20 opportunities scattered throughout Africa and the Mediterranean commencing in the next 18 months,” Thigpen added. Nigeria, Angola, Namibia and Mozambique are particular countries of interest.

Transocean also expects work to continue in the eastern hemisphere, with Eni requiring a rig for follow-on development of a recent discovery in Indonesia. Transocean already has work in the hemisphere with its Endurance and Equinox rigs expected to be in Australia for the foreseeable future.

“We continue to believe that much of new hydrocarbon development will come from deepwater basins as these have consistently shown to yield superior investment returns and produce some of the lowest carbon intensity barrels available today,” Thigpen said. “Our outlook for a prolonged offshore deepwater drilling recovery remains firm, and we will continue to manage our rig portfolio to maximize value.”

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