Analysts: At least it's not getting worse at Transocean

|About: Transocean Ltd. (RIG)|By:, SA News Editor

Offshore drillers continue to show some resilience after Transocean (RIG +1.6%) reported solid Q2 earnings, but analysts suggest it's too early for investors to jump in.

Jefferies analysts still see challenges, in particular for RIG's 5th G fleet as rigs scramble down market/incur idle time; also, the potential for prolonged weakness in the North Sea leads the firm to lower estimates for FY 2016 even as it is "modestly more comfortable" that a broader 2016 recovery could still be in play.

UBS thinks RIG will have to make the decision to either reduce the dividend or increase its debt by 2015; dayrate already are down 25%-40% from peaks levels, and pressure likely will continue given limited rig demand and fierce competition, and regular dropdown proceeds from the MLP probably will not provide quite enough help for RIG's free cash flow.

SDRL +2.7%, NE +2.9%, ATW +2.2%, RDC +2.3%, VTG +1.6%,ESV +0.3%.