Transocean Partners LLC to IPO

July 27, 2014   11 pm

Transocean LTD is spinning off some of their interest in a portion (only 3 deepwater rigs are included in this LLC at this time) of their deepwater oil and gas drilling rigs in an offering of 17,500,000 units this coming week.  Units are estimated to price on Wednesday (7/30) and begin trading on Thursday (7/31).  As is normal these units are estimated to come public at $19-$21/unit. The units will have a minimum quarterly distribution of .3625/unit (7.25% annual yield). 

We like this issue because of the solid demand for deepwater drilling rigs–the 3 rigs included in this offering are ‘booked’ out into the future are rates that provide solid returns and will provide a relatively predictable cash flow.  Additionally there are 77 more Transocean LTD rigs that potentially could ‘drop down’ to the LLC in the coming years.  Also Transocean has 6 new builds coming on stream in the next couple of years–some already contracted for 10 years at day rates of over $500,000/day.  Transocean LTD must offer the LLC the opportunity to purchase a 51% interest in 4 of the 6 new builds–thus we would hope these provide incremental distribution opportunities.

It should be noted that shares of Transocean LTD currently offer a yield of 7.1%—just below the minimum quarterly rate promised by the LLC.

The website of Transocean LTD is here.   The most recent registration statement is below.