Seeking Alpha

Offshore drillers: Ensco downgraded, Rowan maintained Buy at Jefferies

  • Jefferies analyst Brian Handler downgrades Ensco (RDC -0.7%) to Hold from Buy but keeps offshore drilling peer Rowan (RDC +0.1%) at Buy
  • Even after taking delivery of its floating rig newbuilds, Jefferies says ESV will still generate more than one-third of its revenues and EBITDA from jackups in 2016, with nearly half of jackup revenues derived from standard rigs which will make up the units that are more at risk of obsolescence; shares also are expensive on a relative valuation basis.
  • However, the firm still sees enough upside for RDC to maintain a Buy rating, noting above average exposure to Saudi Aramco and the North Sea jackup market, where dayrates appear relatively healthy, and limited ultra-deepwater exposure, as just one drillship remains uncommitted; shares also trade at a ~10% discount relative to the peer group.
  • Earlier: Global Hunter upgrades Diamond Offshore.
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