Transocean stock price: RIG technicals point to more upside

The Transocean (NYSE: RIG) stock price has been in a strong bullish trend in the past two years. The shares jumped to a year-to-date high of $8.85 in August, the highest point since April 2019. At its peak this year, the stock was up by more than 1,200% from the lowest level during the pandemic.

Deleveraging and backlog

Transocean is one of the biggest companies in the energy sector. Like many players in the industry, the company is not well-known by oil and gas consumers. The company does the hard work for some of the biggest companies in the industry like Shell, Equinor, Chevron, and Petrobras.

Transocean provides important services that helps its clients drill offshore oil and gas. Its primary segments are ultra-deepwater floaters, harsh environment floaters, and midwater. Its rigs are spread out around the world, with most of them being in the Gulf of Mexico, Greece, Brazil and North Sea.

Transocean has made several important headlines in the past few months. The most important recent news was the $486 million contract for Deepwater Aquila project. A few weeks earlier, the company won a $222 million ultra-deepwater drillship.

The most recent results showed that the company continued winning large orders. It added over $1.2 billion of backlog, bringing the total amount to over $9.2 billion. It was also the fifth quarter that it added more backlog than it consumed.

The results showed that Transocean had an adjusted EBITDA of $237 million and a net loss of over $110 million. Its free cash flow was $81 million. The company expects that its contract drilling revenue will be $720 million in Q3 and $3 billion for the year. 

The challenge for Transocean investors is that the company is highly leveraged, with over $6.6 billion in debt. The company is working to deleverage its balance sheet. Most recently, some of its debt creditors decided to convert their debt to equity, which will help its balance sheet slightly without being highly dilutive.

Transocean stock price forecast

Transocean bears believe that the company is highly overvalued since it has a PE ratio of 15x and is not making too much profit. Now, turning to the weekly chart, we see that the shares have been in a strong bullish trend in the past few months. It has recently moved above the 50% Fibonacci Retracement level.

The stock also made a golden cross pattern, when the 50-week and 200-week moving averages made a bullish crossover. Also, it recently invalidated the double-top pattern when it moved above the key resistance at $7.77. Therefore, the outlook for the stock is bullish, with the next level to watch being the psychological level at $10.