Barclays calls seemingly cheap offshore drillers value traps


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.

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Comments (24)
  • dieuwer
    , contributor
    Comments (2931) | Send Message
     
    Barclays must be short.
    15 May 2014, 12:54 PM Reply Like
  • ziggyzig
    , contributor
    Comments (428) | Send Message
     
    And back from vacation in Colorado
    15 May 2014, 12:57 PM Reply Like
  • Parker Logan
    , contributor
    Comments (247) | Send Message
     
    Seriously, they def. have an angle... this has been their 5th negative print in 3 months.
    15 May 2014, 12:57 PM Reply Like
  • dieuwer
    , contributor
    Comments (2931) | Send Message
     
    It is clear that the entire financial service industry is one big bubble, filled with liars. It is time it bursts and EVERYONE will lose their job. Let them clean bathrooms instead.
    15 May 2014, 01:02 PM Reply Like
  • King Rat
    , contributor
    Comments (1740) | Send Message
     
    dieuwer, that is just wrong. Do you really trust them to clean your toilet?
    15 May 2014, 01:39 PM Reply Like
  • ComputerBlue
    , contributor
    Comments (1370) | Send Message
     
    They're trying really hard on this call. Day rates for most listed are the same or higher. Utilization is still high in all meaningful locations (see below). Oil still sitting at $100. These guys are paid to speculate and no one is listening thankfully. http://bit.ly/1g8YAOK
    15 May 2014, 01:11 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4388) | Send Message
     
    Pathetic liars who want to get in on cheaper shares.
    15 May 2014, 01:27 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4388) | Send Message
     
    Sorry...i should amend that before that post gets deleted. I mean i believe they dont really believe that and they want to spread fear to induce selling so they can pick up shares on the cheap.
    15 May 2014, 03:30 PM Reply Like
  • Slick E
    , contributor
    Comments (150) | Send Message
     
    Can something with an 11% yield and a 14% downside (SDRL) really be called a value trap?
    15 May 2014, 01:40 PM Reply Like
  • Divot and Bogey
    , contributor
    Comment (1) | Send Message
     
    I wish the self-appointed iconoclasts would quit bashing these great companies. We should be grateful to be out from under middle east oil veils and only wish we could export more. Could, may, thinks...any way you want to spin it, guys.
    15 May 2014, 01:47 PM Reply Like
  • captainofindutry
    , contributor
    Comments (21) | Send Message
     
    I'm still holding onto my shares and waiting for the next dividend :)
    15 May 2014, 01:47 PM Reply Like
  • King Rat
    , contributor
    Comments (1740) | Send Message
     
    For long term investors, this is meaningless drivel. Price always reverts back to fundamentals eventually.

     

    For traders, sorry. You played against the house.

     

    For future investors, well, we're happy. Barclays is giving us a discount. You pretty much had to see this coming. This is not Barclays fault. Barclays is part of the fear drums that always have to beat louder and louder until retail capitulates to the fear.

     

    Same thing when things go to the upside. When oil hit 140 analysts predicted a new normal, 200 1 year price target when the market was more comfortable with 60.

     

    Anyway, when the fear drums get a little louder, I will get a pair of noise canceling head phones and head into the breach.
    15 May 2014, 01:48 PM Reply Like
  • C,Ican
    , contributor
    Comments (8) | Send Message
     
    Barclays, are you kidding me- so drillers are 30% overvalued-as all the big oil companies ,xom, cvx, cop cant hit their supply numbers-and demand is doing nothing but going up, so where are we going to get this oil Barclays??? if not from offshore drillers to satisfy demand. Noble- Ne has 11 billion orders in backlog, Esv close to the same in backlog-Ill sell the drillers ,when these a Tesla in every garage, till then I am glad I don't bank with Barclays ,get some common
    sense. geez, tell them Carl said so
    15 May 2014, 02:18 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (1323) | Send Message
     
    The numbers for RDC & ATW imply they'll trade at very attractive P/E ratios, based on Barclays stressed figures (above). Fine, maybe DO is stretched. But others 2 appear healthy to me.
    Regards
    15 May 2014, 02:39 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1466) | Send Message
     
    Wait haven't most of them already dropped 30% from their 52 week highs. Are they really still 30% over-valued. Right now interest yields seem to continue to shrink to zero and below. SDRL is over 11% div yield at current 98 cents a quarter dividend, say it drops another 30% but pays the same, that yield jumps to over 15%, but I'm guessing profits don't go down, but they go up for the best of breeds.
    15 May 2014, 02:46 PM Reply Like
  • elvislevel
    , contributor
    Comments (841) | Send Message
     
    Always enjoy the calm and rational counter-arguments on a SDRL thread.
    15 May 2014, 04:00 PM Reply Like
  • onneke
    , contributor
    Comments (11) | Send Message
     
    this is indeed the 5th negative call of Barclays this year based on nonsense arguments. they included Ensco in their argument the other day and Ensco reported having sold off 2 rigs at considerable profit above bookvalue. Not exactly a value-trap. all companies hv reported better then expected figures AND still Barclays has only negative reports. They are ashaming their analysts-profession as they clearly try to manipulate the stocks by spreading fear. I am confident on Seadrills figures shortly, reading their progress reports and serious market surveys of qualified oil-shipping analysts. i am long in Ensco-Rig and Seadrill and enjoying a healthy dividend without withholding tax.
    15 May 2014, 04:25 PM Reply Like
  • WhitneyB
    , contributor
    Comments (895) | Send Message
     
    Summary: bad things could happen. Which is but a part of the larger observation that three things could happen; things could get better, or worse, or stay the same. Thanks for the rampant speculation, Barclays.
    15 May 2014, 10:32 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4388) | Send Message
     
    So ESV at a 6% yield is a bad buy???
    16 May 2014, 12:19 AM Reply Like
  • edgaraguzman
    , contributor
    Comments (10) | Send Message
     
    the elite know something, fear is good for the average joe
    16 May 2014, 10:13 AM Reply Like
  • user 18159032
    , contributor
    Comments (2015) | Send Message
     
    SDRL closed at $37 on 1/28/14, the day Barclays predicted it would drop 52% it is about $35 and has gone as low as the high 32s and as high as the upper 36s. These variations are within trading ranges so the effort by Barclays to beat the stock down have largely had the effect of damaging Barclays reputation--if that was possible. Look at the link provided by Computer Blue and see for yourself the day rates that are suppose to be driving Barclays' predicted train wreck. What a joke.
    16 May 2014, 05:34 PM Reply Like
  • jthegolfer
    , contributor
    Comments (85) | Send Message
     
    Barclays is only doing their job. No bank or rating service that invests for customer accounts should be followed. I own rig in the mid 70 s and didn't sell when BP had the spill. Then all advice was to run, but I didn't. I knew more than them, lol. Now with a 40% loss I still own rig. Don't kill the messenger.
    16 May 2014, 08:01 PM Reply Like
  • user 18159032
    , contributor
    Comments (2015) | Send Message
     
    jthe, Your case points up the problem--there is the cry of "wolf" so often that when there is a wolf, he is in among the goats before they can run. For example, starting in 1/28/14 Barclays is trashing the sector in gen. and SDRL in particular. Then on 2/26/14 Barclays pronounces SDRL's dividend is safe. Go to chart read it draw your own inferences from the trading pattern on 2/25,26,27 of 2014 and count the wool gathered.
    17 May 2014, 02:41 PM Reply Like
  • edgaraguzman
    , contributor
    Comments (10) | Send Message
     
    elevator up - 70th floor - DOors open
    19 May 2014, 11:38 AM Reply Like
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