Time to sell drillers as Petrobras cuts rig rates, analyst says

|About: Petrobras - Petroleo Brasil... (PBR)|By:, SA News Editor

Petrobras (NYSE:PBR) plans to spend ~$154B during 2014-18 on Brazil's offshore pre-salt fields, but a budget increase of 4.9% from the 2013-17 budget - considering that budgets for 2012, 2013 and 2014 rose by a respective 8.7%, 13.3% and 10.8% - is a disappointment for U.S. companies operating there, analyst Lenny Zephirin says.

The "monster rate" of $680K/day is coming to an end, as dayrates in Brazil fall in-line with PBR's capex budget, Zaephirin says, foreseeing rates in the mid-to-high $500K/day range for younger ultra-deepwater rigs and from $250K/day to the mid-$400K/day for older rigs, which depend heavily on rig specifications and contract length.

The analyst has Sell ratings for Seadrill (NYSE:SDRL), Ensco (NYSE:ESV), Diamond Offshore (NYSE:DO) and Transocean (NYSE:RIG) - four of the top five companies with the highest backlogs working for Petrobras.