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Thu, Jul. 30, 6:28 PM
- Negative sentiment continued to overwhelm offshore drillers in today's trade, as Ensco (NYSE:ESV), Noble Corp. (NYSE:NE) and Atwood Oceanics (NYSE:ATW) all failed to hold early morning gains despite posting reasonably solid Q2 earnings results.
- J.P. Morgan said it had expected a positive session for ESV after results beat forecasts across the board, as the company executed well and costs dropped 8% Q/Q despite several rig reactivations and newbuild commencements.
- Cowen analysts said NE also beat Q2 expectations, and believes the company can "certainly cover the dividend for now," given significant cash flow generation in 2015 and solid contract coverage through 2016.
- ATW also edged past earnings estimates for the fifth straight quarter, as drilling revenue fell 6% Q/Q and rose 20% Y/Y, though drilling expenses of $134M were at the high-end of guidance.
- The sector finished broadly lower: ESV -7.6%, NE -3.7%, ATW -3%, RIG -3.5%, SDRL -2.8%, DO -3.2%, RDC -2.7%, PACD -3.8%.
Wed, Jul. 29, 5:36 PM
Tue, Jul. 28, 5:35 PM
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Fri, Jul. 17, 11:32 AM
- Offshore drillers are significantly underperforming the broader market following cautious commentary from Schlumberger (SLB -0.1%) despite its Q2 earnings beat, a contract termination and an analyst downgrade.
- On its earnings call this morning, SLB said it expects little improvement in pricing levels in the near future and declines in activity for offshore drillers, while land rigs provide a more attractive opportunity and better margins.
- For its Q3, SLB foresees a further 5%-6% decline in Q/Q revenue as well as lower EPS, and says the $0.77 consensus is a realistic number.
- Yesterday, ConocoPhillips (COP -1.8%) said it plans to cut future deepwater exploration spending, particularly in its operated Gulf of Mexico program; in light of the decision, COP is terminating a contract for an Ensco (ESV -4.9%) deepwater drill ship.
- Also, UBS today downgraded National Oilwell Varco (NOV -1.5%) to Sell from Neutral.
- SDRL -6.4%, RIG -4.7%, RDC -6%, DO -3.3%, ATW -4.2%, HP -1.2%, PTEN -1.2%, PACD -5.7%.
Tue, Jul. 7, 6:57 PM
- Yesterday's news from Atwood Oceanics (NYSE:ATW) of a six-month contract extension on the Atwood Beacon is a positive for the company, but Cowen analysts caution that investors should not consider it a beacon of light for the industry.
- While Cowen welcomes the addition of backlog in calendar 2016 at a slightly higher dayrate than expected, the firm believes the nature of the negotiations - an exchange of lower dayrates for additional backlog - "highlights the continuing downward pressure on operating margins that should be expected across the entire offshore drilling sector going forward."
- The sector enjoyed a strong afternoon bounce in today's trade: ATW +3%, RIG +5.5%, DO +1.4%, RDC +2.1%, ESV +2.7%, SDRL +3%, NE +3.2%.
Mon, Jul. 6, 3:48 PM
- A recovery in offshore drillers such as Transocean (RIG -4.5%), Diamond Offshore (DO -2.2%), Atwood Oceanics (ATW -3.7%), Rowan (RDC -2.3%) and Noble Corp. (NE -1.9%) may be further off than expected, Susquehanna analysts say.
- After believing that an acceleration in the rate at which rigs are being cold stacked or retired could suggest the start of an industry recovery in H2 2016, the firm says the fact that newer, high-specification rigs are now rolling off contract without being renewed points to a more protracted downturn than previously anticipated.
- The firm says RIG and DO possess the oldest ultra-deepwater fleets, with average respective ages of 9 and 17 years old; given the competitive disadvantages of relatively old fleets, free cash flow yields for the companies will be negative (-28% for RIG, -9% for DO) in 2016.
- Susquehanna says the drillers were able to beat its estimates for drilling costs in Q1 by 6% on average, but part of the cost savings were the result of cost deferments, particularly expenses related to repairs and maintenance.
Thu, Jun. 18, 12:28 PM
- Shares of offshore drillers such as Ensco (ESV -5.2%), Transocean (RIG -2.4%) and Seadrill (SDRL -3.4%) are tumbling today, as fleet status updates continue to show tough times ahead for the group.
- In the latest update, ESV said it had agreed to reduce the rate it charged Total (NYSE:TOT) for one ultra-deepwater drillship and reduce the length of the contract on a second ship by six months; two floaters and two jackups also finished contracts and are now idle.
- RBC analysts say they do not expect a bottom in the overall offshore rig count until mid-2016 at the earliest and expect rates and utilization to remain challenged in the interim.
- Also: NE -3%, RDC -1.7%, DO -2.1%, ATW -2%, ORIG -6%, PACD -15.1%.
Thu, Jun. 11, 2:26 PM
- Barclays rolls out coverage of offshore drillers (NYSEARCA:OIH) with a negative outlook, saying "the worst has yet to pass" as customers deal with the low oil price environment and a heavily oversupplied offshore rig market.
- While the stocks likely would rally with higher oil prices (and short covering), fewer rigs then would be retired on the hope of demand improving, preventing the necessary catharsis the industry needs, the firm says, adding that based on its rig-based distributable cash flow valuation methodology, the group's risk/reward profile is not attractive.
- The firm starts shares of Ensco (ESV -3.1%), Rowan Companies (RDC -3.1%), Atwood Oceanics (ATW -5.7%) and Pacific Drilling (PACD -2.7%) with Equal Weight ratings, and Transocean (RIG -5%), Diamond Offshore (DO -4.4%), Noble Corp. (NE -3.9%) and Ocean Rig UDW (ORIG -6.4%) with Underweight ratings, the firm's sell rating equivalent.
Tue, Jun. 2, 6:15 PM
- Half a loaf is better than no loaf at all, as investors pushed shares of offshore drilling contractors to strong gains in today's trade after Hercules Offshore (NASDAQ:HERO) said Saudi Aramco would keep three rigs working but at roughly half the previous dayrates.
- Cowen analysts offer a rather negative take, saying rate reductions were expected, but given the quality of its rigs and its difficult negotiating position, HERO received the harshest rate reductions among its peers; also while competitor contracts will revert to their original dayrates in early 2016, HERO’s rigs will be on the lowered rate through the end of 2016.
- Meanwhile, Atwood Oceanics (NYSE:ATW) received a month-long extension on one of its rigs, which prompts Susquehanna to boost its 2015 EPS outlook to $7.40 from $7.37 but maintain its Neutral rating and $32 stock price target.
- In today's regular session: HERO +6.1%, ATW +2.5%, RIG +3.7%, SDRL +4.2%, NE +4.7%, RDC +5.1%, DO +4.2%, ESV +4.5%, HP +2.5%, PKD +3.3%.
Wed, May 27, 5:07 PM
- Transocean (NYSE:RIG) says Esa Ikaheimonen is resigning as Executive VP and CFO and as Chairman of Transocean Partners (NYSE:RIGP), effective immediately.
- He will be replaced by Mark Mey, who is leaving Atwood Oceanics (NYSE:ATW) as Executive VP and CFO; ATW says it temporarily appointed chief accounting officer and controller Mark Smith to Mey’s old position.
- No reason was given for Ikaheimonen's sudden departure.
Wed, May 27, 10:45 AM
- Offshore drillers have enjoyed a 27% bounce off their March lows but investors should not buy the "head fake" in the stocks, RBC analysts warn, believing the rally was driven mostly by short covering rather than a sustainable shift in offshore fundamentals.
- RBC continues to expect the market to be oversupplied into 2017, and sees more rigs rolling off contracts than are signed up for new work through H2 2015; the firm does not foresee a bottom in the global offshore floating rig count until Q2 2016 since the velocity of offshore spending is much slower than land, and it will take some time for rigs to be put back to work even as oil prices rise in H2.
- The sector is mostly lower, extending yesterday's sharp losses: SDRL, which reports earnings tomorrow, -0.4%, RIG +0.1%, ESV -0.4%, ATW -0.3%, DO -0.4%, RDC -0.1%, NE -0.1%, PACD -1.7%.
Tue, May 19, 11:49 AM
- Offshore drilling contractors are sharply lower across the board after Transocean's (RIG -5.1%) latest fleet status update showed the company has idled three more deepwater rigs, bringing its number of out-of-work units to 15.
- RIG said its deepwater floater Marianas joined the idle fleet along with the Celtic Sea and M.G. Hulme Jr., pushing the idle fleet count to nine rigs.
- The Development Driller II, GSF Rig 140 and Sedco Express were extended by an average of ~80 days but at reduced dayrates; Development Driller II was extended at $315K/day for 100 days, GSF Rig 140 suffered a 40% dayrate reduction to $156K for 120 days, and Sedco Express was extended for 18 days with no rate change.
- Credit Suisse reiterates its Underperform rating with $12 price target, and Cowen maintains its Market Perform rating and $14 price target.
- Also: SDRL -5%, NE -3.6%, ESV -3.6%, RDC -4.2%, DO -4.7%, ATW -3.4%, PACD -6.1%.
Mon, May 18, 7:45 PM
- Goldman Sachs had a lot to say about all corners of the energy sector today in addition to the cut in its long-term oil price forecast, its Sell recommendations for oil majors BP, Statoil (NYSE:STO) and Chevron (NYSE:CVX), and its gloomy outlook for offshore drillers Transocean (NYSE:RIG), Diamond Offshore (NYSE:DO) and Atwood Oceanics (NYSE:ATW).
- Goldman awards a Buy rating for Exxon Mobil (NYSE:XOM), "the only U.S. or European major that can generate sufficient free cash flow to cover its dividend near $60/bbl in 2016-17"; while the firm says other oil majors will be struggling to keep the dividend flat, XOM will be in a position to increase the dividend for the next several years.
- With its expectation for long-term weakness in oil and gas prices, Goldman sees risk exposure in many names that are reliant on commodity prices, suggesting selling LINE, DPM, NGLS, while predicting PAGP and NS would benefit from a removal of the U.S. crude oil export ban.
- The firm thinks many midstream MLP names now offer attractive valuations, recommending ENB, EPD, ETE, PAA, SXL, WNRL.
- Goldman sees an upturn for frac sand provider Emerge Energy (NYSE:EMES), upgrading shares to Buy from Neutral.
- Other Buys: CLR, NFX, CQP, HEP.
- Other Sells: TRP, TCP, GPOR, MUR, GTE
Mon, May 18, 3:19 PM
- The Goldman Sachs energy team is as gloomy as ever on offshore drillers such as Sell-rated Transocean (RIG -3%) and Diamond Offshore (DO +0.9%), as well as downgraded Atwood Oceanics (ATW -3.2%), believing that 2017 will be "a particularly painful year."
- The industry is retiring floating rigs, but that will not solve the problem without rising demand, Goldman says, expecting demand instead will fall an additional 8% by 2017, which will keep utilization at 77% and meaning significant further idling of floating rigs and sizable rate pressure on deepwater rigs.
- Goldman says although ATW remains the "best-in-class” offshore driller and is somewhat cushioned in 2016-17 from the weak macro environment owing to contract backlog, the company faces significant re-contracting risk in 2017, which is "becoming hard to ignore."
- Earlier: BP, Statoil, Chevron cut to Sell at Goldman Sachs
Tue, May 12, 11:35 AM
- Ocean Rig UDW’s (ORIG +13.6%) better than expected Q1 earnings report follows the pattern set earlier this reporting season by Transocean (RIG +1.7%), Noble (NE +2.8%) and Diamond Offshore (DO -0.1%), and the group is moving higher in morning trade.
- Q1 contract drilling revenues of $402M beat estimates, as ORIG’s on-the-water fleet again delivered an impressive operating performance, Cowen analysts say; ORIG achieved record utilization of 99%, up from last quarter’s 95%, and adjusted EBITDA of $219M was well ahead of Wall Street’s $168M forecast.
- Q1 operating expenses of $153M were down 22% Q/Q as cost-cutting initiatives are starting to be reflected in results, a trend Cowen expects will continue throughout the remainder of 2015.
- ORIG also maintained its $0.19/share quarterly dividend even in the face of a declining offshore rig market.
- Also: SDRL +4.7%, ESV +2.3%, RDC +2.1%, ATW +0.8%.
Thu, May 7, 5:25 PM
- Transocean (NYSE:RIG) ripped through its Q1 earnings estimates but shares fell 3.6% in today's trade, swept away along with most other energy companies as U.S. crude oil prices tumbled back below $60/bbl.
- But some analysts say RIG could have been the victim of a classic case of "buy the rumor, sell the news" after shares had gained 40% since March 13 heading into earnings.
- Analysts at Clarkson Capital believe RIG has "received more than enough credit over the past month to account for solid operational performance in Q1," urging investors not to chase the stock at current levels.
- Cowen's J.B. Lowe thinks today’s price action was "an awareness that there are no other major drillers to report upside earnings surprise (except Seadrill)... and that the recent run up in share prices has been too much too quickly."
- Other oil drillers also finished broadly lower: RIGP -4.3%, SDRL -6.8%, NE -6.6%, DO -4.6%, ESV -6.1%, RDC -2.9%, ATW -5.8%, PACD -8.7%.
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