Why Transocean Ltd. (RIG) Stock Triumphed on Tuesday

What happened

Offshore drilling company Transocean (RIG -2.54%) was in the money on Tuesday, and investors handsomely rewarded its stock for this. Its price rose to end the day nearly 7% higher, a performance that was down to a new, nine-figure deal signed by the company.

So what
Before market open, Transocean announced it had been awarded a $518 million contract for one of its ultra-deepwater drillships to operate in the Gulf of Mexico. The counterparty was identified only as "an independent contractor."

The arrangement spans 1,080 days and will involve a drillship of Transocean's choosing. It currently has three at its disposal and will make its selection at least one year before the earliest date in the commencement window.

The project is expected to begin between the fourth calendar quarter of 2025 and the second quarter of the following year.

In its press release trumpeting the new deal, Transocean signaled that times are very good for its business.

"The fact that our customers are securing rigs well in advance of their programs and committing to long-term contracts clearly demonstrates the tightness of the market," the company quoted CEO Jeremy Thigpen as saying.

"Additionally, our ability to designate the specific rig closer to the commencement of the program provides us with increased flexibility to optimize the utilization of our high-specification fleet of ultra-deepwater drillships," he added.

Now what
The Transocean leader's pronouncements are certainly valid; these are indeed frothy times for companies involved in nearly every aspect of energy source exploration and production. While no single project makes or breaks a business in the ever-cyclical oil and gas sector, $518 million is a lot of scratch, and investors are right to cheer the company's winning of this contract.

Source: www.fool.com

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