Market Structure at Transocean
Transocean Inc is a globally diversified company. The company currently operates in an oligopoly structure due to its small number of competitors. Its operations are geographically spread in oil and gas exploration and development areas. The company has a fleet located in the Far East (22 units), Middle East (18 units), U.K. North Sea (17 units), U.S. Gulf of Mexico (13 units), India (12 units), Angola (11 units), Brazil (11 units), other West African countries (nine units), Nigeria (nine units), Norway (five units), the Caspian Sea (three units), the Mediterranean (two units), Trinidad (two units), Australia (one unit), and Canada (one unit) (Corporate Overview, 2009).
Impact of New companies entering the market:
Due to new companies entering into market, has resulted in an oversupply of drilling units and due to this over supply there has been a subsequent decline in utilization and day rates, sometimes for extended periods of time in the industry where there are numerous companies already available with no dominant market share. Due to the entry of new and upgraded units in the service is expected to increase supply and that in turn could curtail a strengthening in day rates of rigs. Due to this the profitability of companies will get affected with a high level of price competition in the market.
The industry in which the company is operating has historically been cyclical and is impacted by oil and gas price levels and volatility throughout the world. Due to its cyclical in nature there have been periods of high demand, short rig supply and high day rates, followed by periods of low demand, excess rig supply and low day rates forcing the price to fluctuate in a cyclical manner. Also changes in price of commodity have a considerably high impact on the pricing of Transocean Inc products. Due to the current economic crisis and high level of competition has reduced the price of the rigs (Transocean’s First Monthly)...