Better Buy: Seadrill Partners LLC vs. Transocean LTD
Operating conditions in the offshore drilling industry have been abysmal over the past few years. While the worst appears to be over, it could be years before the sector recovers, and that's assuming oil prices head higher. That said, for investors with a long-term mindset and a bullish view on crude prices who want to start dipping their toe in the water, Seadrill Partners (NYSE: SDLP) and Transocean (NYSE: RIG) are two options worth considering. Both companies have healthy revenue backlogs and liquidity positions, which should help keep them afloat until conditions improve. That said, after drilling deeper into these two companies, it's clear that Transocean is the better option to buy.
Transocean's fleet has undergone a significant transformation over the past few years. Before the downturn, the company controlled an industry-leading 87 offshore drilling vessels. However, it has since retired 33 older rigs, sold its entire jackup fleet, and made two fleet acquisitions. As a result, its current fleet -- including those under construction or contract -- stands at 55, the bulk of which are newer, more valuable ultra-deepwater and harsh environment rigs. That said, what's important to note about Transocean's fleet isn't its size but the backlog supporting those vessels. Currently, the company has an industry-leading backlog of $14.3 billion, which provides it with clear cash flow visibility for the foreseeable future since many of those contracts stretch out several years.
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Source: Fool.com
