- The commodities boom makes oil and gas investing an attractive option.
- Transocean stock offers affordable exposure to rising energy prices in 2022.
- Investors should consider adding shares of Transocean as the company boasts an industry-leading backlog of big-ticket contracts.
Ready to take on the fast-paced energy market? Switzerland-based Transocean (NYSE:RIG) stock provides offshore contract drilling services globally, and RIG stock is a fast mover for risk-tolerant traders.
You may have heard about legendary investor Warren Buffett making big moves in the oil-and-gas industry recently. Meanwhile, West Texas Intermediate (WTI )crude oil prices hit $130 not long ago, and RBC Capital Markets analyst Michael Tran declared that it’s “not unfathomable for prices to rocket to $200 a barrel by summer.”
However, not all energy stocks are equally worthy of your attention and your investment capital. Transocean is a legacy standout in this fast-paced business, as the company has been around since the 1920s, when T.S. “Stoney” Stoneman bought the company’s first drilling rig.
The times have surely changed since the 1920s, but Transocean remains a fierce industry competitor. Checking up on the company’s latest stats, we’ll find that Transocean is a powerful revenue generator with a redoubtable fleet and a deep order backlog.
What’s Happening with RIG Stock?
$5 is the number to watch, as RIG stock hit resistance there in July of last year and again in early March of 2022.
Once the stock breaks through that level with heavy trading volume, it’s off to the races, as they say. Naturally, investors will want to keep a close watch on WTI crude oil prices, which will influence petroleum stocks generally.
There’s no guarantee that Tran’s vision of $200-per-barrel oil will actually come true. Still, as some nations strive to avoid dependence on Russian energy sources, drillers like Transocean will likely be called upon to fill the supply gap.
And, if any company is prepared to answer the call to “Drill, baby, drill,” it’s Transocean. As of March 18, the company had a listed fleet of 37 rigs, including ultra-deepwater, harsh-environment, deepwater and midwater floaters.
As InvestorPlace contributor Chris MacDonald humorously but concisely put it, “With calls for more output increasing, the expectations are that Transocean’s pipeline of business may be filling (no pun intended).”
Big Backlog, Big Revenue
On Valentine’s Day this year, Transocean demonstrated that the company is getting a lot of love from its big-money clients.
According to the company’s Feb. 14 fleet status report, Transocean drill contract backlog totaled a jaw-dropping $6.5 billion. Some of the contracts and contract extensions are set to generate almost $300,000 per day for the company.
Moreover, Transocean affirms that 90% of this massive contract backlog is with investment-grade companies. The company also claims that its backlog is around twice that of Transocean’s nearest competitor.
Having a sizable backlog of contracts is great, but does Transocean’s popularity among energy-market clients translate to robust revenue?
There’s no doubt about it. In 2021, Transocean generated $2.556 in contract drilling revenue (unaudited), with $621 million of that occurring during the fourth quarter.
Furthermore, Transocean CEO Jeremy Thigpen served up a couple more impressive stats.
“Despite the continuing challenges that COVID-19 presented to us all, for the full year, we delivered exceptional uptime performance resulting in revenue efficiency of 97.0% and Adjusted EBITDA of $995 million,” the CEO clarified.
What You Can Do Now
Don’t get the wrong idea — there’s risk involved in oil-market investments. So, please don’t pour your entire account into one oil-driller stock.
That having been said, it’s easy to see why Transocean is such a high-conviction driller. The company’s contract backlog is vast, and Transocean is a terrific revenue generator.
So, don’t be afraid to add a century-old energy business to your watch list. Whether oil goes up to $200 or not, RIG stock deserves to trade above $5 for the long term.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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