RIG
#Good morning.
Well, <UNK>, good morning.
I think what we have to look at is from our own conversations with our customers.
It's really hard for us, difficult for us to project what will happen to our competitors, but for those folks that are suffering for the lower commodity prices I think we will see more contract terminations or probably a little bit more a contract renegotiation, but from our fleet and our perspective we are not hearing those conversations as of today.
In fact, we are in conversations with some extensions of our fleet, so we believe that with our strong backlog that our conversations perhaps are going to be a little bit different than our competitors.
I think that's the point.
Almost 80% of our backlog is with the super majors and 90% is with investment-grade companies, so we feel really good about the strength of the backlog and being able to convert that into future earnings and cash flow.
Never say never though.
It depends on what happens in the market obviously, but right now we aren't having those conversations with our customers.
Yes, sure, <UNK>.
We focus mainly, as I've mentioned to you guys in the past, focus mainly on the new-debt maturities.
So we have been buying back the 2016, 2017, 2018s mainly with some focus on the 2020s to 2022s.
It just so worked out the previous quarter that our opportunity to actually attract bonds, raise the bond availability was later in March.
Good morning, <UNK>.
I think I'll be very clear in the past that we have substantial liquidity.
We have an industry-leading backlog and I think we have a debt maturity profile that allows us to avoid the equity market.
I think we'll be opportunistic with regard to adding and refinancing our maturities with secured-debt options in the event that we are able to achieve that, but at this stage we do not feel that equity is the right solution for Transocean.
As you well know, the impairment test is based on the remaining life of the assets and these assets will be dominantly delivered around 2000, so you're looking at assets that would last through 2020.
So given the fact that we have a significant tail, on average about 15 years or so of remaining life of these assets, I think it's fair to say we feel very strongly that given the way we have approached our stacking on these assets they've been cold stacked with the intention of reactivating these rigs very quickly and cost effectively, so as the market does recover in 2018 and 2019 as <UNK> has mentioned in the past, we believe these rigs will come back to the market and we will be able to earn sufficient cash flows to offset the carrying value of that remaining period.
Yes, <UNK>.
I think we've taken a pretty thoughtful view of the global float and kind of positioned our rigs against that.
As we look at our fifth-generation rigs, not all of them but the vast majority of them, we see them being highly competitive when the market turns around.
Other than really the Gulf of Mexico and presalt Brazil, these are excellent assets that are proven to be very valuable for us and our customers, so we feel good about our asset strategy and fifth gens will be a part of that asset strategy.
<UNK>, we typically look at our liquidity as spongeable, so cash and revolver, so we fully expect to be able to use a combination of both to retire the 2016s.
The potential secured debt is opportunistic on our part.
We don't feel that it's necessary to raise that debt to retire the 2016s or the 2017s for that matter, so anything we gauge in addition to our current liquidity in the form of secured debt would be over and above what we planned to manage through the cycle.
Good morning, <UNK>.
This is <UNK>.
Look, I've been very clear that in the past on these calls that currently the value arbitrage that we enjoyed when we listed Transocean Partners for the first time has reversed, so it's not economic for us to be able to use Transocean Partners in the capacity which was envisioned initially.
That is still our intention if and when the market does recover for both the offshore drilling industry and for yield-based vehicles.
So the intention there would be to nurture Transocean Partners as best we can and recognize when the opportunity provides itself we will utilize the vehicle in the capacity in which we intended.
Yes, that's a good question.
So we believe that the interest certainly with the majors is very high in Brazil and we think that at some point, and of course I can't tell you when that set time is going to happen, but the customers that have bet big on Brazil are very focused on developing those opportunities.
So when the time comes, I think that we will be participating in a meaningful way and, again, I think as we wait for Petrobras to take another look at their fleet and continue to high grade, I think that they are going to be able to extend some of these contracts, and we've been speaking with them a lot, too.
So, again, we've been having a lot of conversations about Brazil.
Good morning, <UNK>.
Well, <UNK>, I think I was very clear in my prepared comments with regard to what one-time costs we saw in the first quarter with regard to the reactivation costs on the Goodrich, the mobilization which we recognized in the quarter as some severance costs, but obviously the trend is Q1 will be higher, Q4 will be the lowest for the year because as you model out our operating activity with a number of rigs, those decline throughout the year.
That being said, we have to factor in the addition of the [Polassa], the Proteus, and obviously the reactivation of the Goodrich which will go in the other direction but, in general, you are going to see a significant reduction in operating cost.
In addition, as you know with the first-quarter's contract cancellations, we have announced that those rigs are going to be cold stacked, but there are certainly costs associated with cold stacking the units, which is expense in the 30 to 60 days, so you'll see that flow through in the February, March, and some of it in April time frame as well.
I think that there's going to be a few opportunities, more opportunities for blend and extend.
We did something a little bit different than our competitors have done.
We did actually with BHP in Trinidad we actually inserted a contract and then moved all of our terms to the right in Trinidad to help better align that program with BHP's objectives.
So you might see a bit more of that where we're able to do that and certainly remain focused on our cash flow, but as far as true blend and extend, we are in discussions with a few customers and again I they we will see a few more.
Hey, <UNK>.
<UNK>, I think that was three or four questions in one.
I'll try to go through them all again.
I think we've been pretty clear, do we see the up-tick in oil price and the sustainability of it early enough for customers to build it into their budgets for next year.
We aren't sure.
We said publicly we don't know the answer.
We said publicly we expect 2016 and 2017 to be challenging, so I think it would be a pleasant surprise if oil prices continue to move up and to the right and customers got confidence ahead of their budgeting cycle where we could see meaningful improvement and activity for next year, but we're not building the business on that right now, so that was one piece of it.
I think that the second piece of it in terms of how quickly can we respond, it's going to depend on the rig and the condition of the rig.
We have a team that is both responsible for the stacking of the rig and also that same team is responsible for reactivating the rig, so we're doing everything that we possibly can to ensure that we're preserving this equipment and preserving these rigs in a way we can reactivate them cost effectively and quickly, but it's going to depend on the rig.
Some of them may take 60 days, some of them may take 120 days, but that's the range of reactivation we're looking at across the fleet right now.
There was a little bit of static in the line.
I'm not sure you got the question.
Can you ask again, <UNK>.
<UNK>, this is <UNK>.
I think it's expected to assume that you're going to have dollars spent across the board, right.
You're looking at dollars being spent onshore, shallow offshore, harsh environment, deepwater, Gulf of Mexico, and elsewhere.
So I think what's going to be an interesting driver of the recovery is the makeup and financial viability and strength of our customer base.
So as we look around the world and we look at the basins and the main customers in those areas, that's going to drive how they return back to the market.
I think <UNK> made a comment in his prepared statements around Venezuela, for example.
If you don't have any funds available you aren't going to be able to attract service companies or E&P companies to be able to restart your production.
So I think we have to think about that as well in the context of what's going to be first, second, and what's going to be most viable on a perspective basis.
Well, <UNK>, I'd love to answer the question but <UNK> speaks to customers a lot more than I do, so I'm going to defer it to her.
As you look historically you're right because it's easy to plug and play on the jack-ups and the mid-water fleet and we certainly expect the UK Norway to react pretty quickly.
The ultra-deepwater sites, we do have the independents who are telling us that if $50 looks really great and they could do some plug and play, so I think we'll see that happen as long as we have some sustained momentum certainly with the commodity price, but as far as the majors they've got to get a little bit more stability.
It takes awhile to do their feed study, so I think we're going to see a pause until they get more comfort and are able to push their programs forward.
It's going to be a range.
It's going to depend on the asset itself, but we kind of had a range on ---+ if you go through the different classes of rigs, ultra deepwater might be somewhere between $20 million and $100 million and I know that's a big range, but that's kind of where we are.
And then as you go into some of the lower classes of rigs, that high end comes down obviously maybe into the $70 million and $60 million range, but until we do it we're not going to know.
We've got pretty good plans in place.
We have got good ideas of what it is going to cost us, but until we actually execute, we are not going to know, <UNK>.
Thank you to everyone for your participation and questions on our call today.
If you have any further questions, please feel free to contact me.
We will look forward to talking with you again when we report our second-quarter 2016 results.
Have a good day.
