Barclays cuts targets for offshore drillers, sees potential 40% downside

|By:, SA News Editor

Offshore drillers Atwood Oceanics (ATW +0.5%), Diamond Offshore (DO +2.4%), Rowan (RDC +0.9%), Ensco (ESV +0.8%) and Transocean (RIG +1.5%) are higher today even as Barclays cuts its price targets on the stocks.

The firm thinks near-term risk is skewed to the downside following a series of negative fleet status reports from the offshore drillers recently and concern for dayrate pressure in most offshore markets; if conditions deteriorate further, the firm would expect underlying asset values to decline further (NAVs declined 16%-plus following the financial crisis and 8% after Macondo), suggesting potential 40% downside before ultimate NAV support takes hold.