- While some analysts are beginning to see value in shares of battered offshore drillers, the team at Raymond James thinks conditions will get worse before they get better.
- After a strong decade, the deepwater drilling rig market is facing a multi-year down-cycle, RJ says; most previous offshore drilling cycles have been short-lived thanks to sudden demand shocks that have self-corrected relatively quickly, but this downturn is more of a new rig supply problem compounded by a moderation in offshore spending from the suddenly “return driven” multinational major oil companies - meaning this down-cycle should be more drawn out than usual.
- While everyone loses in such an environment, the firm is more comfortable in owning companies with higher-quality assets that also carry higher floater contract coverage to provide some safety during the downturn, specifically Ocean Rig UDW (ORIG +0.4%), Pacific Drilling (PACD -0.1%) and Rowan (RDC +0.1%), given their high-specification exposure.
- Also: SDRL +0.7%, RIG +0.5%, ESV +0.2%, DO -0.5%, ATW -0.9%, HERO -1.3%.
It's still not time to buy offshore drillers, Raymond James says
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