Transocean (RIG) Up 16.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Transocean (RIG). Shares have added about 16.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Transocean due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Transocean Ltd. before we dive into how investors and analysts have reacted as of late.

Transocean Q2 Earnings Beat Estimates, Revenues Decline Y/Y

Transocean reported a second-quarter 2026 adjusted earnings of 3 cents per share, beating the Zacks Consensus Estimate of 1 cent. The bottom line also improved from the year-ago quarter’s breakeven adjusted earnings. The outperformance was supported by exceptional performance of the Harsh environment floaters that delivered higher revenues, stronger fleet utilization, improved revenue efficiency and higher average daily revenues.

The Switzerland-based offshore drilling contractor’s contract drilling revenues of $966 million surpassed the Zacks Consensus Estimate of $939 million by 2.9%. This was backed by higher-than-expected revenues from harsh environment floaters, which beat the consensus mark of $274.3 million. However, the top line decreased 2.2% from the year-ago quarter’s reported figure of $988 million due to lower revenues from the Ultra-deepwater floaters.

Adjusted EBITDA was $312 million, down from $344 million in the year-ago period and $440 million in the first quarter of 2026. However, the figure beat our model estimate of $260.9 million. Adjusted EBITDA margin was 32.2% compared with 34.9% in the year-ago quarter and 40.7% in the prior quarter.

Q2 Segmental Revenue Breakup

Ultra-deepwater floaters accounted for about 64.5% of total contract drilling revenues, while harsh environment floaters contributed the remaining 35.5%.

Transocean’s ultra-deepwater floaters generated revenues of $623 million in the reported quarter, down from $699 million in the year-ago period and $748 million in the prior quarter. Moreover, the figure missed our model estimate of $665 million.

Harsh environment floaters contributed $343 million, compared with $289 million in the year-ago quarter and $333 million in the first quarter of 2026. Moreover, the figure beat our model estimate of $274.3 million.

Revenue efficiency was 97%, down from 97.3% in the previous quarter but up from 96.6% in the year-ago period. Ultra-deepwater revenue efficiency reduced to 95.7% from 96.7% a year ago, while harsh environment revenue efficiency came in at 99.5%, improving both sequentially and year over year.

Day Rates, Utilization & Backlog

Average daily revenues increased to $472,500 from $458,600 in the year-ago quarter but decreased from $475,600 in the prior quarter. The figure beat our estimate of $443,900.

Average daily revenues from ultra-deepwater floaters decreased to $455,500 from $457,200 a year ago. However, the figure beat our estimate of $446,800. The metric for harsh environment floaters increased to $510,000 from $462,400 in the prior-year quarter. The figure also beat our estimate of $437,200.

Fleet utilization improved to 78.2% from 67.3% in the year-ago period. Ultra-deepwater utilization was 72.6%, while harsh environment utilization reached 94.2%.

As of Aug. 5, 2026, Transocean’s total backlog was approximately $6.7 billion. Since its May 2026 fleet status report, the company added five new fixtures, representing nearly $292 million of incremental backlog at a weighted average day rate of about $461,000.

Costs, Capex & Balance Sheet

The company reported costs and expenses of $812 million, which were 1.3% lower than the year-ago quarter’s level of $823 million. Additionally, depreciation and amortization costs decreased to $148 million from $175 million a year ago.

The oil and gas drilling company spent $24 million on capital investments in the second quarter. Cash provided by operating activities was $236 million. Cash and cash equivalents were $509 million as of June 30, 2026. Long-term debt amounted to $4.7 billion, with a debt-to-capitalization of 36.1% as of the same period.

Q3 & 2026 Guidance

For the third quarter of 2026, the company expects contract drilling revenues in the range of $920-$960 million. Fleet-wide revenue efficiency is projected at 96.5%. Operating and maintenance expenses are expected to be between $595 million and $625 million, while general and administrative expenses are projected at $45 million.

The company expects $113 million in interest expense, while interest income is projected to be $5 million to $10 million. Capital expenditures are estimated at $40 million to $50 million and cash taxes paid are expected to be between $25 million and $30 million during the same period.

For the full-year 2026, RIG expects contract drilling revenues to be between $3900 million and $3975 million. Operating and maintenance expenses are projected between $2325 million and $2400 million, while general and administrative expenses are anticipated in the $170-$180 million range. Capital expenditures are expected to be around $150 million, while year-end liquidity is projected between $1.25 billion and $1.35 billion.

Full-year cash taxes paid are expected to range from $55 million to $60 million.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -35.19% due to these changes.

VGM Scores

Currently, Transocean has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Transocean belongs to the Zacks Oil and Gas - Drilling industry. Another stock from the same industry, Patterson-UTI (PTEN), has gained 24.9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

Patterson-UTI reported revenues of $1.23 billion in the last reported quarter, representing a year-over-year change of +0.7%. EPS of $0.00 for the same period compares with -$0.06 a year ago.

Patterson-UTI is expected to post earnings of $0.03 per share for the current quarter, representing a year-over-year change of +150%. Over the last 30 days, the Zacks Consensus Estimate has changed +18.1%.

Patterson-UTI has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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This article originally published on Zacks Investment Research (zacks.com).

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