- Transocean (RIG -0.8%) is maintained with an Underweight rating and a reduced price target of $10 at J.P. Morgan, which says that although the company’s Q3 earnings exceeded expectations, the results were not as good as peers and secular headwinds will continue to impact performance.
- RIG’s cost beat of 3% was much lower than the peer average of ~8%, analyst Sean Meakim says, as RIG delayed delivery on two Shell drillships, "resulting in a mostly neutral impact on liquidity."
- RIG guided to a 25%-30% Y/Y decline in operating expense in 2016, but attributed ~80% of savings to reduced activity levels; JPM calculates that 2017 projected liquidity of $4B-$5B implies a cash burn of $200M-$1.2B, which translates to an annual CFO of $1.4B-$1.8B.
- “While the liquidity forecast is in line with past commentary and achievable in our view, the means of arriving there looks significantly more painful when coupled with the opex guidance," Meakim writes.