Head to Head Analysis: Transocean (RIG) and Pacific Drilling (PACDQ)

Transocean (NYSE: RIG) and Pacific Drilling (OTCMKTS:PACDQ) are both energy companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, analyst recommendations, dividends, earnings, institutional ownership and profitability.

Profitability

This table compares Transocean and Pacific Drilling’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Transocean -84.09% 2.10% 1.23%
Pacific Drilling -101.35% -17.63% -7.68%

Valuation & Earnings

This table compares Transocean and Pacific Drilling’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Transocean $4.16 billion 0.89 $778.00 million ($7.14) -1.32
Pacific Drilling $769.47 million 0.02 -$37.15 million ($20.58) -0.03

Transocean has higher revenue and earnings than Pacific Drilling. Transocean is trading at a lower price-to-earnings ratio than Pacific Drilling, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

73.1% of Transocean shares are owned by institutional investors. Comparatively, 0.4% of Pacific Drilling shares are owned by institutional investors. 0.3% of Transocean shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Volatility & Risk

Transocean has a beta of 1.8, suggesting that its stock price is 80% more volatile than the S&P 500. Comparatively, Pacific Drilling has a beta of 3.21, suggesting that its stock price is 221% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Transocean and Pacific Drilling, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Transocean 9 10 13 0 2.13
Pacific Drilling 0 0 0 0 N/A

Transocean presently has a consensus target price of $12.15, indicating a potential upside of 28.59%. Given Transocean’s higher possible upside, equities analysts plainly believe Transocean is more favorable than Pacific Drilling.

Summary

Transocean beats Pacific Drilling on 11 of the 12 factors compared between the two stocks.

Transocean Company Profile

Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The Company’s primary business is to contract its drilling rigs, related equipment and work crews on a dayrate basis to drill oil and gas wells. As of February 9, 2017, it owned or had partial ownership interests in and operated 56 mobile offshore drilling units. As of February 9, 2017, its fleet consisted of 30 floaters, seven harsh environment floaters, three deepwater floaters, six midwater floaters and 10 high-specification jackups. As February 9, 2017, it also had four ultra-deepwater drillships and five high-specification jackups under construction or under contract to be constructed. Its contract drilling services operations are spread across oil and gas exploration and development areas throughout the world. The Company’s drilling fleet can be characterized as floaters, including drillships and semisubmersibles, and jackups.

Pacific Drilling Company Profile

Pacific Drilling S.A. is an international offshore drilling contractor. The Company provides offshore drilling services to the oil and natural gas industry through the use of high-specification rigs. The Company’s primary business is to contract its high-specification rigs, related equipment and work crews, primarily on a day rate basis, to drill wells for its clients. The Company is engaged in drillships segment. The Company focuses on the high-specification segment of the floating rig market. The Company considers high-specification requirements to include rigs in water depths of approximately 7,500 feet or projects requiring advanced operating capabilities, such as hook-loads (>800 tons), accommodations (over 200 beds), mud storage and pumping capacity, and deck-load and space capabilities. The Company’s contract drillships operate in the deepwater regions of the United States, Gulf of Mexico and Nigeria.

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