Frank Curzio
Founder & CEO of Curzio Research, Wall Street Unplugged Host
Transocean is a $7 billion company facing the biggest offshore drilling boom in 15 years, and it could double or triple. New technology lets a single ship drill two wells at once, collapsing the cost of offshore oil, so every major oil company and sovereign fund is drilling offshore, from Total's West Africa deals to Exxon's discoveries. That sends demand for the rigs and drillships these companies own through the roof. Elliott has just bought into Transocean. x.com x.com x.com x.comÂ
Transocean's current free cash flow puts its DCF value well into double digits with modest growth. With more aggressive growth, it would be a multibagger. Improved leverage, Valaris synergies and more rigs make it the best way to play a new offshore cycle, if one is underway. The deal has cleared reviews but still needs shareholder approval. High short interest suggests a squeeze is coming soon, though its trigger level is unknown. x.comÂ
Offshore-industry consolidation is a major tailwind for Transocean. Approval of its merger with Valaris should unlock upside over the next few quarters, with shares next running to $7 or higher. x.comÂ
Transocean looks expensive against its cash earnings: at $5.79 it trades at 7x, while oil and gas producers usually get 6x. Fair value is about $3.43-$4.36, or 6x next year's cash earnings give or take 12%, so buyers are paying about 33% over fair. This is a valuation read only, based on reported earnings and revenue estimates. x.comÂ
Transocean's new contract adds to its momentum even before the catalyst it is waiting on. It won a two-year deal with ONGC for its Dhirubhai Deepwater KG2 drillship, starting in Q1 2027 and worth about $300 million, and the stock has broken above $6. x.comÂ
Money is rotating from big refiners and integrated oil companies into oil drilling and servicing firms. The move could be in its early innings, and the recent drilling gains alongside refiner losses are working in that direction. x.comÂ
Transocean looks compelling because offshore drillers trade like distressed cyclicals even as they add backlog. It sits near 0.93x book and 1.8x sales, with generalists scarred by 2020-21 bankruptcies, yet it has added about $1.6B of backlog since April, with recent day rates near $550k. Management guides utilization above 90% by late 2026, near 100% in 2027, and approval of the Valaris merger could re-rate it. Oil is the key risk: WTI below about $60 would bring capex cuts. x.comÂ
Transocean shows unusual call flow and a bullish chart pattern setup. x.comÂ
Shell's stronger refining profits and larger buyback support the view that its breakout holds. Q3 adjusted earnings reached $10.8 billion versus $9.9 billion expected, as refining margins hit a record $42 a barrel; the three-month buyback rises from $3 billion to $5 billion. Those margins will not last forever. x.comÂ
Oil demand will far outstrip supply regardless of alternative energy sources, driven by AI, reshoring, massive money expansion and global industrial growth. All energy sources will be needed to the max. x.comÂ
Oceaneering International's subsea robotics for deepwater energy is back in focus as AI power demand and energy security take center stage. After a near-death cycle, the stock is back at its highs and setting up for a volatility-contraction breakout. x.comÂ
