Barclays calls seemingly cheap offshore drillers value traps

|By:, SA News Editor

The YTD beatings suffered by Seadrill (SDRL), Transocean (RIG), Diamond Offshore Drilling (DO), Atwood Oceanics (ATW) and Rowan (RDC) have left them looking attractive to some value investors, but Barclays thinks the offshore drillers aren't as cheap as they look.

Barclays believes the seemingly compelling valuations are a "value trap," as it sees potential for 30% or more downside to current earnings estimates based on current market dayrates for various asset classes.

Examples: ATW’s 2015 earnings could come in 45% below estimates, which would give it a valuation of 11.1x 2015 estimates, not 6.1x, and DO’s earnings could come in 63% below, giving it a valuation of 26.2x, not 9.8x.

The least impacted would be RDC, as the analysts see a theoretical downside of just 2.3% lower than 2015 forecasts, which would leave valuation nearly unchanged at 7.2x.