Strong day for drillers despite mediocre fleet status updates


Shares of offshore drillers Transocean (RIG +0.8%) and Diamond Offshore (DO +1.6%) are holding up well despite lukewarm updates for the status of their fleets.

RIG said one rig had signed a nearly three-month extension but another floater is now idle, which puts the total number of idle rigs in the fleet at four; RBC analysts think 2014 will continue to be characterized by dayrate pressure for all floaters and downtime between contracts, and RIG could stack some older rigs if demand does not materialize.

DO signed a contract for one of its rigs, but Cowen cut its price target to $47 from $50 and earnings estimates to $4.50 from $4.60 as it increases the expected idle time on one rig to three months from one month and expecting another to be stacked next year.

Also: NE +1.3%, ESV +1.4%, ATW +1.1%.

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Comments (6)
  • AlbionWood
    , contributor
    Comments (934) | Send Message
     
    Ofshore drillers had been oversold, so even a lukewarm update looks good compared to the freezeup the market seemed to have been expecting.
    18 Mar 2014, 01:23 PM Reply Like
  • evan.prospect
    , contributor
    Comments (704) | Send Message
     
    Can RIG sell their older rigs to someone smaller and if so, how big is the market for them?
    18 Mar 2014, 02:07 PM Reply Like
  • earthtodan
    , contributor
    Comments (394) | Send Message
     
    RIG sold a bunch of old jackups to Shelf Drilling, which if I understand correctly is a company recently formed by ex-Transocean execs who see a market for them. There's probably more info in the industry news sites (Rigzone, upstreamonline).
    19 Mar 2014, 02:04 AM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (9552) | Send Message
     
    the key is that some like RIG and DO will have to stack rigs, but it doesn't mean that new rigs have to take large price cuts.
    18 Mar 2014, 02:48 PM Reply Like
  • saratogahawk
    , contributor
    Comments (2533) | Send Message
     
    RIG has already offloaded a large chunk of its shallow water fleet. The deepwater fleet is much better configured for success and has a relatively newer technical capability with an array of 5th and 6th gen equipment. Its all mission-specific anyway. Not every job needs the newest bells and whistles. Lots of companies with older rigs are doing just fine because they have maintained the equipment and it meets the mission needs. RIG will be a completely different company by this time next year.
    Carl Icahn has representation on the BOD and will not allow a long time before RIG is reconfigured to be more competitive.
    RIG has undertaken to bring in more state of the art units equipped with dual activity capability.
    RIG is required by law to vote annually on its dividend so it is addressed at the May shareholder meeting.
    The new dividend recommendation from management is $0.75 per qtr for the 1 year period following the shareholder approval.
    2009/2011 financials reflect the Macondo impacts including the reserve of $1.4 billion so really can't be compared to pre-Macondo financials.
    RIG is targeting more than $800 million in onshore and offshore cost reductions. Most of these will happen by 2016.
    Recent financials also include the Aker Drilling acquisition impacts.
    The Company's plan to concentrate on udw, harsh environment and high spec is consistent with what I believe should be the longterm configuration for success in this industry.
    RIG is bringing in dual-gradient dual activity prepared equipment. This is more efficient than similar generation equipment not so configured.
    18 Mar 2014, 04:34 PM Reply Like
  • frank paxman
    , contributor
    Comments (1586) | Send Message
     
    saratogahawk: Yours is probably the most informative comment I've ever read on SA. Thank you.
    18 Mar 2014, 06:37 PM Reply Like
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