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Dec. 4, 2015, 3:49 PM
- Barclays sees little reason for optimism among offshore drilling contractors despite recent outperformance, particularly in light of recent guidance from major oil companies for dramatically reduced offshore spending in 2016; the firm expects another leg down in stock performance as a lack of contracting activity and a massive oversupply of floaters looks daunting in light of the spending cuts.
- Nevertheless, Barclays upgrades Atwood Oceanics (ATW -5.8%) to Equal Weight from Underweight with an $18 price target, and now considers the stock fully valued after dropping ~23% over the past three months; the firm sees the most downside to Transocean (RIG -3.4%), Diamond Offshore (DO -3.5%) and Noble Corp. (NE -4.6%), while Pacific Drilling (PACD -5.6%) and Ocean Rig UDW (ORIG -4.1%) show the most upside but also come with the most risk with little equity remaining and looming liquidity issues.
Nov. 30, 2015, 2:23 PM
- The "lower for longer" consensus on crude oil prices is overly conservative, and prices will begin bouncing back next year, Guggenheim analysts say as they upgrade the oil services sector to Buy and see plenty of upside for the major players given current market conditions.
- Guggenheim is calling for oil prices to return to $100/bbl by 2018, and sees 10% upside across the board for oil services stocks in the next year resulting from the group's unique exposure to crude prices.
- Within the group, the firm prefers Rowan (RDC +1.8%) and Atwood Oceanics (ATW +1.6%), as their backlogs should help reduce near-term risk, RDC has no newbuild commitments and ATW is finalizing a contract in Brazil for one of its two uncontracted rigs, utilization in the Middle East (NYSE:RDC) and Australia (NYSE:ATW) should be resilient on a relative basis, and both have fleets that make them more interesting M&A candidates.
- Upgraded to Buy from Neutral: CAM, RIG, NE, OII, PACD, DO, ESV, CLB, OIS, HP, NBR, CRR, NOV, DRQ, FI, PTEN, SSE, FTI, CJES, FET, SPN.
Oct. 29, 2015, 3:44 PM
- Pacific Drilling (PACD +11.2%) is sharply higher after announcing it had terminated a construction contract with Samsung Heavy Industries for a newbuild deepwater drillship.
- PACD says Samsung failed to deliver the Pacific Zonda drillship on schedule and will seek a refund after already making ~$181M in advance payments to the South Korean shipbuilder.
- The cancellation comes in the same week that Statoil blamed the delay on the start of its Mariner project in the North Sea on delays on topside delivery at the Daewoo ship yard in South Korea.
Sep. 18, 2015, 12:45 PM
Sep. 16, 2015, 12:45 PM
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. 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. 10, 2015, 3:48 PM
- Raymond James analysts sayOcean Rig’s (ORIG +5%) Q2 earnings announced last Friday were impressive due to its high revenue efficiency and strong cost controls, but keep the stock rated Market Perform because of continued market weakness.
- ORIG continues to reduce its daily operating costs for active rigs, but the firm agrees with management's cautious view that it does not see any short-term market improvement coming soon.
- The firm also continues to rate Pacific Drilling (PACD +9.1%) at Market Perform, even as the offshore drilling contractor continues to post solid operational performance, with revenue efficiency again coming in near the top of guidance and lower-than-expected operating costs.
- But the PACD's outlook remains a concern, the firm says, because of anemic demand and the company’s availability, with up to four rigs with availability to start 2016 and very limited demand on the horizon.
Jul. 23, 2015, 2:36 PM
- Pacific Drilling (PACD +10.6%) pushes to 10% gains after providing a business update that highlights significant cost improvements and reduced cost guidance across the board due to prudent project deferrals and overhead management.
- PACD increased its average revenue efficiency to 94%-96% from 92%-96%, cut 2015 capex to $425M-$450M from prior guidance of $500M-$525M and reduced Q2 G&A expenses to $55M-$58M from a prior outlook for $63M-$66M.
- PACD has been able to achieve $32M in cost savings and expects to deliver $100M in annual run rate savings for a 20% reduction.
- While Raymond James is impressed with the better than expected cost control guidance, the firm maintains its Market Perform rating on the stock amid caution because of the difficult environment facing offshore drilling demand.
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%.
Jun. 18, 2015, 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%.
Jun. 12, 2015, 10:29 AM
- The year-long oil price rout has depressed Pacific Drilling’s (PACD +4.9%) market value by nearly two-thirds, making it an attractive takeover target for operators looking to strengthen their presence in ultra-deepwater drilling, Bloomberg writes.
- PACD already has garnered interest from larger rivals such as Ensco (ESV -1.2%), Transocean (RIG -2.8%) and Seadrill (SDRL -1.9%) in the last 12-18 months, with one of the approaches coming as recently as this year, according to the report.
- PACD is not believed to be actively exploring a sale, but the shares are trading well below replacement value for the rigs that they own, Evercore analyst James West points out.
Jun. 11, 2015, 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.
May 19, 2015, 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%.
May 6, 2015, 3:18 PM
- Pacific Drilling (PACD -3.7%) reported strong Q1 earnings on Monday, prompting Cowen analysts to maintain their Outperform rating on its shares but they also say PACD's relationship to Chevron (CVX -0.5%), once a positive, might have become a risk.
- PACD is now overly-reliant on its CVX backlog, with four of PACD’s five working rigs contracted to CVX (the fifth is working for Total) in either the Gulf of Mexico or Nigeria, the firm says; also, the newbuild Pacific Meltem is currently available for work in the Gulf of Mexico and actively being bid for CVX’s two-year tender in the region.
May 5, 2015, 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%.
Pacific Drilling SA is an international offshore drilling contractor committed to becoming the preferred provider of ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification rigs.
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