Why Transocean Stock Rose 25% in December

Shares of energy services provider Transocean (NYSE: RIG) rose by a huge 25% in December according to data from S&P Global Market Intelligence. That's a massive increase, but it comes off a very low base, given that even after the December advance the stock was off by 66% in 2020. Both of those numbers come right back to oil.

Transocean's customers are energy exploration and production (E&P) companies. The relationship is fairly straightforward. When oil prices are high, E&Ps tend to invest heavily to find and produce new oil. When oil prices are low, E&Ps pull back on such capital investments. The impact on Transocean's business should be obvious: When its customers are spending aggressively it does well; when spending is low it doesn't. With oil plunging in 2020 thanks to the economic shutdowns used to slow the spread of the coronavirus, the energy industry pulled back hard and Transocean's stock fell as investors anticipated a period of poor operating performance.

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Source Fool.com