Oct. 9, 2015, 4:37 PM
- The Zephirin Group sees "little risk in going long” offshore drillers such as Transocean (NYSE:RIG), Ensco (NYSE:ESV), Rowan (NYSE:RDC), Noble (NYSE:NE) and Diamond Offshore Drilling (NYSE:DO), given that the shares have been "bleeding out" since the beginning of the year.
- The firm believes investors are accepting the realities of soft demand, day rate and utilization rate - and management should be applauded for navigating the past three difficult quarters - and have zero conviction on the offshore drilling outlook for 2016.
- With plenty of bargains available, Zephirin recommends building a position in the sector's best stocks - RIG, ESV, RDC, NE and DO - in the current final leg of 2015.
Oct. 8, 2015, 4:58 PM
- KeyBanc analysts contend that six offshore drillers - Diamond Offshore Drilling (NYSE:DO), Ensco (NYSE:ESV), Noble (NYSE:NE), Transocean (NYSE:RIG), Rowan (NYSE:RDC) and Hornbeck Offshore Services (NYSE:HOS) - should be well positioned to lead in an industry recovery.
- The six are responding to the downturn by aggressively cutting costs, building cash, retiring and scrapping their oldest rigs, and defending the value of their contract backlogs in the face of customer requests for renegotiations of contract terms and provisions; "when the dust settles, [they] should be well positioned and ready to lead in an industry recovery," KeyBanc writes.
- But the firm says it is too soon to invest in a prospective industry rebound when the companies are still reporting a steady stream of bad news amid declining demand for all classes of offshore rigs, thus the six companies only merit Sector Weight ratings.
Oct. 8, 2015, 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)
Sep. 28, 2015, 6:19 PM
- Transocean (NYSE:RIG) is upgraded to Hold from Sell at Deutsche Bank, which believes the company - with a new management team in place - is in position to take radical restructuring measures that could include re-capitalizing the balance sheet and scrapping up to 40 rigs.
- While Deustche Bank was feeling a little better about RIG, Susquehanna sticks with its Negative outlook and $11 price target even while raising its estimates for the beaten-down driller; despite RIG’s attempt to lower costs and operate under a smaller scale, the firm sees the challenging market dictating RIG's outlook for at least the next two years amid an environment of muted demand and rig oversupply.
- It was a rough day for offshore drillers: RIG -4.7%, ESV -6.3%, RDC -2.4%, DO -5.2%, ATW -5.7%, NE -4.3%, SDRL -8.9%, ORIG -6%, PACD -11.5%.
Sep. 25, 2015, 6:41 PM
- With Transocean (NYSE:RIG) now caught up in the Petrobras (NYSE:PBR) corruption investigation, Credit Suisse examines the offshore drillers with exposure to the Brazilian company and finds Diamond Offshore (NYSE:DO) and Seadrill (NYSE:SDRL), among others.
- Since 2007, PBR has contracted ~100 rigs from 21 operators for drilling services for a total backlog of $48B; the company's top five drilling contractors over the period were Brazil's Odebrecht and DO with 15% market share, followed by RIG (13%), Brazil's QGOG (12%) and SDRL (11%); other drillers taking backlog include Ensco (ESV, 9%), Noble (NE, 8%), Ocean Rig UDW (ORIG, 6%) and Vantage Drilling (VTG, 3%).
- PBR is reducing its drilling fleet as part of a wider effort to cut spending, and so far this month has canceled at least two rig contracts and five platform supply vessel contracts.
- Earlier: Transocean denies wrongdoing in Petrobras case, shares -3.3%
Sep. 3, 2015, 3:44 PM
- Credit Suisse downgrades Seadrill (SDRL -1.4%) to Underperform from Neutral with a $5 price target, cut from a previous $7, and Pacific Drilling (PACD +0.5%) to Neutral from Outperform with a $3 target, down from $4 earlier, while maintaining an Underperform rating on the overall offshore drilling sector.
- The sector "will get worse before getting better," but it will get better by 2018-19, although "the biggest question around most companies' value is what will their fleet look like for the next cycle," analyst Gregory Lewis writes.
- The firm maintains Neutral ratings on Ensco (ESV -0.1%) and Diamond Offshore (DO +2.8%), with best in class balance sheets but fleets that are likely to look a lot different next cycle; Atwood Oceanics (ATW -0.4%) also is rated Neutral.
- The firm maintains an Underperform rating on Transocean (RIG -0.8%), owing to its balance sheet and fleet mix, while keeping Outperform ratings on Rowan (RDC +0.8%) and Noble Corp. (NE +0.8%)
Sep. 1, 2015, 6:57 PM
- Diamond Offshore (NYSE:DO) is upgraded to Market Perform from Underperform along with the overall offshore drilling segment at Wells Fargo to reflect valuations below net asset value and the potential for an underappreciated demand profile in a recovery scenario in 2017-18.
- But it is hardly a ringing endorsement, as the firm also cut its offshore drilling earnings estimates by 10%-40% for 2016 and 20%-60% for 2017 to primarily reflect likely 5%-15% reductions in floater dayrates and 10%-20% reductions in jack-up dayrates as well as updated idling/stacking assumptions across each fleet.
- For DO, the firm believes the downside risk for the company’s fleet is largely priced in, and that DO’s free cash flow and strong balance sheet relative to the industry suggests more of a neutral outlook than meaningful downside risk.
- Wells' move hardly helped today's stock results in the sector, which were sharply lower: DO -4.2%, RIG -3.5%, SDRL -6.3%, ESV -5.5%, NE -2.4%, ATW -4.5%, RDC -2.1%, ORIG -6.3%.
- At the same time, Wells downgraded land drillers Pioneer Energy (NYSE:PES), RPC Inc. (NYSE:RES) and Patterson-UTI (NASDAQ:PTEN) to Market Perform from Outperform.
Aug. 26, 2015, 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.
Aug. 25, 2015, 11:10 AM
- Moody's places 11 offshore drilling companies under review for a downgrade, citing concerns regarding "an extremely challenging operating environment through at least 2017."
- The ratings agency expects oil prices to remain volatile and rise minimally through 2017, meaning the energy producers that hire offshore drillers will remain under pressure to keep a lid on spending.
- "Sustained weak crude oil prices and a steady supply of newbuild rigs will cause significant credit erosion as contracted backlogs, revenues and cash flows continue to fade," Moody's writes, and "fewer offshore drilling opportunities will be available, resulting in a potentially prolonged period of lower dayrates and fleet utilization."
- The companies under review are DO, ESV, NE, RDC, RIG, ATW, SDLP, ORIG, PGN, PACD and Shelf Drilling Midco.
Aug. 13, 2015, 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.
Aug. 6, 2015, 3:30 PM
- Crude oil futures extended their slide today, falling another 1.1% to below $45/bbl, weighed by the global supply glut, a strengthening dollar and concerns about China’s economy.
- Goldman Sachs today joined the group that expects crude prices will remain "lower for longer" to allow the oil market to find equilibrium, maintaining its near-term target for U.S. crude at $45/bbl but warning that risk is skewed substantially lower.
- Along with a further deterioration in fundamentals, "the financial markets' decreasing confidence in a quick rebound in prices and a recognition that the rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market," Goldman writes.
- Unlike yesterday, however, the energy sector has rebounded after starting out today's session as the weakest equity performer; several notable energy companies, including Transocean (RIG +13.3%), Diamond Offshore (DO +7.6%), Newfield Exploration (NFX +6.2%) and Ensco (ESV +7.4%) turned in quarterly results that beat expectations, defying concerns that weak energy earnings will weigh on the S&P 500.
- ETFs: USO, OIL, XLE, UCO, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, DWTI, ERY, DIG, DTO, DUG, BGR, USL, XES, IYE, IEO, IEZ, DNO, FENY, PXE, PXJ, FIF, OLO, SZO, NDP, RYE, FXN, OLEM, DDG
Aug. 3, 2015, 6:04 AM
- Diamond Offshore Drilling (NYSE:DO): Q2 EPS of $0.66 beats by $0.19.
- Revenue of $634M (-8.4% Y/Y) beats by $28.63M.
Aug. 2, 2015, 5:30 PM
Jul. 30, 2015, 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%.
Jul. 17, 2015, 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%.
Jul. 10, 2015, 10:19 AM
- Transocean (RIG -0.2%) is downgraded to Sell from Neutral with a $15 price target, cut from $10, at Clarkson Capital, even while the firm predicts the offshore driller will beat Q2 earnings forecasts.
- Clarkson suspects RIG's Q2 numbers will be strong on the back of high utilization and lower costs, but downplays their importance "given weakening industry fundamentals and our expectations that a number of rigs will be stacked/scrapped going forward, effectively reducing the company’s earnings capacity once the cycle turns."
- The firm sees RIG as a loser in the market downturn due to its fleet composition of older rigs and low-end ultra-deepwater units; since drillers with top-grade assets will be the first to secure utilization, RIG likely will be forced to stack a number of units, effectively reducing normalized earnings capacity.
- Clarkson also downgrades Diamond Offshore (NYSE:DO) to Sell from Neutral, with a $17 target, citing a premium valuation, shrinking active fleet and deteriorating earnings power.
Diamond Offshore Drilling, Inc. is a deepwater drilling contractor which provides drilling services to the energy industry around the globe with a fleet of offshore drilling rigs. Its fleet of offshore drilling rigs consists of semisubmersibles, six jack-ups and drillships. The company's diverse... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States
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