By J. Royden Ward , Analyst and Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory, 1/31/09 Sign up for free Cabot Wealth Advisory e-newsletter
Transocean (RIG) is the world's largest offshore drilling contractor with 66 deep-water drilling rigs and 68 shallow-water rigs working in all of the major offshore regions.
The company's 2007 acquisition of Global Santa Fe added substantial debt to RIG's balance sheet, but RIG is paying down the debt rapidly and should be in a position to begin paying dividends before the end of 2010. EPS soared 67% in 2008 and will climb another 15% in 2009.
EPS growth is propelled by higher rental rates for deep-water rigs and a huge $41 billion backlog of contracts. I believe oil prices will increase in 2009, which will help RIG even further. At 3.3 times current EPS, RIG shares are an outstanding bargain.
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J. Royden Ward
Editor of
Cabot Benjamin Graham Value Letter A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of
Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the
Value Letter.