Transocean Ltd SWOT and PESTLE Analysis

Strength

1. Expertise in harsh environment drilling: Transocean has a fleet of 14 harsh environment floaters. Norway is the largest harsh environment market for oil exploration and drilling. The company’s multiple harsh environment submersibles are dedicated to drilling in the harsh environment of Norwegian North Sea and Barents Sea. It is in collaboration with one of the largest oil and gas company, Shell in that region and Shell is the biggest consumer of Transocean due to its technical prowess in drilling in extreme weather conditions around the Arctic Circle. Due to increasing unrest in the Middle East, many companies are heading towards this region and looking at that, surplus harsh environment rigs are kept ready to serve the market requirements. Transocean holds the record to possess first hybrid fuel-efficient floater for harsh environment, Transocean Spitsbergen. One of the floaters is fitted with automated drilling control system and five more are planned to be fitted with advanced tools for efficient and safe drilling.

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Weakness

1. Absence in onshore drilling: The oil drilling market is largely divided into onshore and offshore drilling. The offshore drilling comprise of oil wells under the seabed whereas the onshore drilling consists of sites located on the land. 70% of the worldwide oil production comprises of onshore drilling. Onshore drilling has lesser backlogs as 65% of the onshore wells exhaust within the first year itself. Added with it, onshore drilling does not face scarcity of workforce as the need to stay in adverse condition, in the middle of the sea, may be avoided in onshore drilling. Transocean is a legacy holder and veteran in offshore drilling. However, it has no share in the larger part of the market, i.e., onshore drilling. It only trades with risky offshore drilling and highly dependent on handful of companies who are interested in offshore drilling. Most of the oil producers prefer onshore drilling due to shorter duration of drilling before extraction of oil and minimized risk factors. During a downturn of oil prices, onshore exploration may be paused and companies can easily plug the losses. Offshore drilling requires greater investment of assets and requires greater time to recover losses after upturn in oil prices as oil drilling in offshore basins cannot be stopped but only could be slowed down and operation cycle is also longer (more than 5 years). It is always preferable to diversify business to remain immune to fluctuating prices of products and services.

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Opportunity

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Threats

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Political

<p.1. Dissent and faction amongst OPEC+ members: Crude oil saw its best prices till 2014. A higher price of crude oil benefits all oil and gas companies and service providers including Transocean. With the advent of the USA in the supply arena of crude oil through shale gas, oil prices started tumbling and could not recover to 2014 levels. OPEC is an abbreviation of Organization of Petroleum Exporting Countries, which constitutes Algeria, Angola, Congo, Equatorial Guinea, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE and Venezuela. They control 80% of the oil supply of the world. They held the responsibility to keep oil prices above $100 a barrel but failed due to disagreements on controlling the supplies, which ultimately pulls down the crude oil price. Later 10 more countries added themselves to form OPEC+, which constitutes of Russia too. In January 2020, with the outbreak of Covid-19 oil prices started tumbling. OPEC+ could have controlled the fall but Russia and Saudi Arabia denied curtail in their produce and oil prices fell below $25. This has resulted in monumental losses to all the oil service providers, even Transocean. Hence, decision making among OPEC+ nations related to supplies of crude oil becomes vital in the functioning of the oil industry. Many companies will be compelled to file bankruptcy if the downfall in oil prices continue.

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Economic

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Social

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Technological

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Legal

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Environmental

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