Tue, Nov. 10, 12:48 PM
Tue, Nov. 10, 12:28 PM
- Atwood Oceanics (ATW +13.8%) surges following much better than expected FQ4 earnings on 12% higher revenues and agreeing to a contract extension for the ultra-deepwater rig Atwood Advantage with Noble Energy.
- Cowen analysts explain that the beat was caused by more than just cost cutting, with contract drilling revenues of $349M ahead of their $337M forecast, driven by $197M in ultra-deepwater revenues that rose 13% Q/Q; deepwater and jackup revenues of $79M and $73M also were ahead of forecasts and up a respective 3% and 9% Q/Q.
- Cowen says ATW's EBITDA margin of 61% was ahead of its 57% estimate, and was the highest on record since 63% in FQ2 2011.
- In its agreement to extend the contract for the Atwood Advantage for an additional three months through August 2017, ATW will lower its dayrate to $240K/day, 60% less than the $584K dayrate the rig had fetched previously under a three-year contract.
Thu, Nov. 5, 2:47 PM
- Transocean (RIG -8.5%) sinks after reporting better than expected Q3 earnings, but it was "low quality beat," Citigroup’s Scott Gruber writes, as the effective tax rate and deprecation were both below forecasts.
- Reiterating his Sell rating, Gruber says RIG's Q3 operating costs came in higher than consensus expectations, unlike the other offshore drillers that beat estimates on cost control, EBITDA was roughly even with consensus, and gross margins declined 3% Q/Q to 45%.
- RIG, which previously announced plans to scrap 21 floaters, added another during Q3, the 32-year-old semi-submersible GSF Rig 135.
- CEO Jeremy Thigpen said in today's earnings conference call that tough times would continue for offshore drillers over the next year or two as weak oil and gas prices rule out new investments, but activity eventually will rebound because oil companies have to replace dwindling reserves.
- The CEO said RIG would be interested in making a bid for an entire company, but only if the value was good and the deal gave RIG a chance to upgrade its fleet.
- RIG also lowers its full year 2015 expense guidance to $415M-$420M, partly due to earlier debt retirements during the quarter.
- Related peers also are lower: RDC -4.6%, SDRL -3.7%, ATW -3%, NE -2.4%, ESV -0.9%, DO -0.2%.
Thu, Oct. 8, 11:47 AM
- Termination notices and rig stacking/disposal indications from Ocean Rig UDW (ORIG -16%) "foreshadow the difficulties facing the offshore drilling subsector as we move into 2016," say Raymond James analysts Praveen Narra and J. Marshall Adkins.
- "Though cost control and newbuild delays drove Ocean Rig to post an impressive Q2, we remain concerned about the underlying fundamentals of the business and financial leverage in an anemic market," they say, maintaining their Market Perform rating.
- Related names: Seadrill (SDRL -4.3%), Transocean (RIG -4.5%), Ensco (ESV -1.7%), Noble Group (NE -2.7%), Rowan (RDC -1.4%), Diamond Offshore (DO -0.3%), Atwood (ATW -2.2%)
- Previously: Ocean Rig -13% following fleet update (Oct. 7)
Wed, Aug. 26, 10:46 AM
- Transocean (RIG -3.3%) opens down but off premarket lows following news of its plans to suspend dividend payouts and book 2B Swiss francs ($2.1B) in asset impairments; other offshore drilling contractors trade mixed.
- Raymond James says RIG's move is prudent given the difficulties facing the offshore drilling market: "All in on an annual basis, the cancellation of the dividend would result in $220M in retained liquidity... We view this as prudent as [RIG] can use the cash to improve its own liquidity or work to eventually high grade its fleet."
- Cowen notes the decision comes as somewhat of a surprise, since the dividend had been approved by shareholders last May, and adds the move could be seen as an indication that the market has grown incrementally worse in just the three weeks since RIG Aug. 6 earnings call.
- Offshore peers: DO +1.2%, SDRL +2.2%, ESV +0.3%, RIGP +0.3%, RDC -0.1%, ATW -0.2%, NE -2.2%, VTG -4.3%, ORIG -1.5%, PACD flat.
Thu, Aug. 13, 10:30 AM
- Offshore drilling stocks could see further downside despite already falling ~30% in two months, Barclays analysts say, expecting offshore spending to decline by double digits again in 2016 as operators wait for signs of oil price stability and lower development costs before committing resources.
- The firm says floater retirements have stalled, with 38 retirements since last October but only three since June, making little headway for the 60-70 additional floater retirements the industry needs to rebalance the market.
- The firm downgrades Atwood Oceanics (ATW -7.3%) to Underweight from Equal Weight with an $18 price target from a previous $27, and maintains Underweight ratings on Diamond Offshore (DO -3.7%), Noble Corp. (NE -6.7%) and Ocean Rig UDW (ORIG -6.2%); Ensco (ESV -5.2%), Pacific Drilling (PACD -5.2%) and Rowan (RDC -6.3%) are maintained with Equal Weight ratings.
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%.
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, 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, 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%.
Tue, May 5, 2:35 PM
- Diamond Offshore (DO +5.9%) is surging a day after reporting better than expected Q1 results due to a lower tax rate for the quarter after adjusting for impairments and restructuring charges, but Susquehanna analysts refuse to jump on the bull train.
- The firm cuts its 2015-16 EPS estimates to $1.95 and $0.01 from $2.18 and $0.09 to reflect lower revenues based on expected dayrates and utilization, as DO indicated that its outlook is expected to be worse for the remainder of 2015 and is showing the first signs of leading edge rigs becoming un-contracted as they roll off.
- Despite cost-cutting measures DO and other offshore drillers have taken to offset lower utilization, the firm believes dayrates and activity levels still have room to go lower.
- But with oil price strength today, DO and other offshore drillers are moving higher: SDRL +10.2%, RIG +4.2%, ESV +3.1%, RDC +4.5%, ATW +4.5%, NE +1.9%, PACD +6.8%, HERO +6.5%.
Thu, Apr. 30, 11:48 AM
- Ensco (ESV +4.1%) and Atwood Oceanics (ATW +5.8%) are sharply higher following their strong Q1 earnings reports (I, II), even though neither company sees the offshore drilling environment getting much better soon.
- Cowen analysts note that management commentary on the outlook for the offshore drilling sector remains gloomy as the current downturn looks to be extending well into 2016, but says ESV’s recent ability to refinance $1.1B of debt speaks to the company’s "strong positioning amongst its peers as one of the premier offshore contract drillers."
- Meanwhile, ATW also enjoyed a "great quarter" but challenges remain, including lower rig utilization and pricing, according to Credit Suisse.
Tue, Apr. 21, 11:48 AM
- Raymond James doubles down on its negative outlook for offshore drilling contractors, as the firm cites the lack of new contracts and the need for a much more significant move in oil prices to materially change the sector's landscape.
- The firm says the current contracting rate trends well below its expected pace and even below 2009 levels as the desire to pursue further activity skids to a halt, and believes that 2016 consensus estimates have substantial room for downward earnings revisions; including contract cancellations, the sector actually experienced negative incremental demand during the Q1.
- Raymond James sees the average offshore rig count declining by 13% in 2016 and a further 4% in 2017; even with cost-cutting efforts, it expects the average uncontracted rig to lose money as leading edge dayrates will flirt with risked breakeven levels with only minimal recovery in the next two years given the levels of excess supply.
- Offshore drillers are lower today: ORIG -5.8%, RIG -4.5%, SDRL -4.1%, NE -2.8%, ESV -2.8%, DO -2.1%, ATW -2.1%, PACD -2%, RDC -1.9%.
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