Oil price is finally touching new highs amid declining crude stockpiles of the US and the latest crackdown in Saudi Arabia initiated by the Crown Prince, Mohammad Bin Salman. Salman plans to list several business segments of Saudi Aramco in 2018. This would give a boost to oil prices. Analysts think that the biggest benefactors of the upcoming oil rally will be offshore drillers. Transocean LTD (NYSE:RIG) is the best stock to buy right now on the back of the upcoming oil rally. Transocean recently posted better-than-expected Q3 results. Revenue in the quarter increased by 7.6% sequentially. Transocean LTD (NYSE:RIG) CEO Jeremy Thigpen has completely modernized the fleet of the company. Transocean currently has some of the newest and advanced machinery. All of these changes were done while maintaining a strong balance sheet.
Transocean LTD (NYSE:RIG) free cash flow continued to impress the Street even in a bearish industry environment. The company generated $862 million in free cash flow over the last 12 months.
Transocean LTD (NYSE:RIG) recently signed some excellent deals which will start bearing their positive results in the near future. In August, the company signed an agreement to acquire Songa Offshore and its fleet of 7 floaters. Four of these floaters are designed for harsh environment.
Transocean shares are down more than 26% since the start of this year. Last month, Transocean shares plummeted massively after the company signed a contract with Deepwater Invictus at a dayrate of $145,000. The rate is over 70% lower than the market average. However, we believe that the market overreacted to the news. The machinery being used in the contract is old, and the type of contract justifies the lower rate. Transocean LTD (NYSE:RIG) recently also won big contracts for its Semi-sub Deepwater Nautilus, Semi-sub Paul B. Loyd and Deepwater Pontus (won a contract from Shell)
Transocean LTD (NYSE:RIG) fundamentals remain strong if we see them in the context of the market environment. The company has over $4.3 billion in net assets, compared to the liabilities of $1.8 billion.
Investment firm Jefferies recently increased its price target for Transocean LTD (NYSE:RIG) stock to $11. The firm has a “Hold” rating for the stock.