Tue, Aug. 2, 1:42 PM
- After adjusting for the Relentless termination fee, Rowan (RDC -8.2%) missed revenue estimates, according to Citi's Scott Gruber. While the stock is "cash flow king" among the offshore drillers and has one of the highest quality fleets, its backlog is quickly fading and the Cobalt contract remains a concern. The risk/reward "is still not appealing," he says, keeping the rating at Neutral.
- Adjusted for items, Atwood Oceanics beat wasn't quite as impressive as the headline suggests, according to Credit Suisse's Gregory Lewis. While it was a good quarter, he sees "clouds gathering." Finding work in the oversupplied Gulf of Mexico will be challenging, says Lewis, and the Condor contract is up in Q4.
- Transocean (RIG -3.2%) continues to sell off following its deal to buy Transocean Partners (RIGP -2.8%), but earnings are due tomorrow. RBC's Kurt Hallead sees EPS of $0.04 vs. consensus of $0.00, but revenue of $896M falling short of the Street at $923M.
- Also at work ... the price of oil is down 1.7%, and has again slipped below $40.
- Source: Ben Levisohn in Barron's
Fri, Jul. 22, 2:23 PM
- Transocean (RIG -5.5%) falls more than 5% after its latest fleet status report showed it stacked an additional six rigs, taking its total number of currently stacked rigs to 28, with reduced dayrates for others.
- RIG says it won a two-year contract for one of its semi-submersibles to operate off India for ONGC at a $127K dayrate, and a newbuild ultra-deepwater rig started operations on a 10-year contract in the Gulf of Mexico at a $498K dayrate.
- Following the report, RBC's Kurt Hallead says RIG shares have limited upside until the market gains more confidence in the supply and demand outlook for floating rigs in 2017-18. Currently, fundamentals continue to weaken for floating rigs, and it remains unclear where dayrates and utilization may bottom.
- Offshore drillers are broadly lower: RIGP -1%, DO -1.5%, ESV -4.2%, RDC -5%, SDRL -1.6%, NE -4.8%, ATW -3.6%, PACD -3.8%.
Tue, Jul. 12, 11:30 AM
- Six oil services stocks - Flotek Industries (NYSE:FTK), Schlumberger (SLB +4.4%), Halliburton (HAL +4%), Oceaneering (OII +6%), Superior Energy Services (SPN +5.5%) and Rowan (RDC +8.1%) - should do well regardless of the price of oil, Stephens analyst Matthew Marietta says.
- The past 18 months have proven that trying to predict specific commodity prices is a guessing game, Marietta says, but he thinks that a global ratio of reserves to annual production levels at an all-time high, coupled with global equipment overcapacity and cost deflation "has the potential to create a price environment range-bound in line with our sensitivities."
- Stephens also upgrades RDC and Nabors Industries (NBR +9.8%) to Overweight from Equal Weight.
Mon, Jul. 11, 3:19 PM
- Transocean (RIG -2.4%) is sharply lower after Seaport Global downgraded its rating to Sell from Neutral with a $10 price target, as valuation "seems stretched... given that little has changed regarding the protracted oversupply of rigs in offshore markets."
- RIG also will have a higher annual cash interest expense burden due to last week's $1.25B unsecured note issuance, Seaport says.
- Offshore drillers are broadly lower as crude oil futures fell 1.4% to a two-month low $44.76/bbl: RIGP -2.2%, SDRL -1.1%, DO -0.3%, ESV -3%, NE -1.1%, RDC -0.4%, ATW -2.6%.
Fri, Jul. 1, 2:38 PM
- Rowan (RDC +6.4%) is on the rise following its latest fleet status report that include three contract extensions while another unit will go on a standby rate.
- The contract for the Rowan Resolute ultra deepwater vessel in the Gulf of Mexico will be extended until July 2018 at a $580K dayrate, the Rowan Viking jackup offshore Norway will be extended until November 2017 at a $275K dayrate, and Saudi Aramco is extending its deal for the Gilbert Rowe jackup until the end of this year at its current $69K dayrate.
- The company’s Rowan Gorilla VII jackup will be put on a standby rate of 85% next month for Apache.
Wed, Jun. 29, 3:35 PM
- Transocean (RIG +5.1%) is upgraded to Hold from Sell with a $12 price target, raised from $11, at Evercore ISI, which says it is optimistic that the company has the management team to lead it out of the current downturn, and that earnings visibility and the balance sheet should improve shortly.
- The firm notes that RIG has enjoyed some success in securing new contracts, and some potential blend-and-extends are expected to be finalized shortly, but dayrates likely are at or near cash breakeven levels and RIG still needs to take additional steps to right-size its fleet.
- Evercore rates offshore drilling peers Ensco (ESV +3.3%), Noble Corp. (NE +2.4%) and Rowan (RDC +0.8%) at Buy, while Seadrill (SDRL +0.9%) and North Atlantic Drilling (NADL +0.7%) are rated Sell.
Tue, Jun. 28, 3:28 PM
- Ensco (ESV +5.9%) surges after Susquehanna upgrades shares to Neutral from Negative, citing recovering crude oil prices and the stock's valuation and relative underperformance; of course, rising crude prices today also are helping.
- The firm says higher crude prices has not sparked improved demand for offshore rigs, and it could take through 2018 before any material demand potentially arises, but ESV has underperformed other offshore drillers by a wide margin and now trades below the average for offshore drillers.
- But Evercore ISI remains cautious on offshore drillers, arguing that "not a single stock screens 'cheap,'" although it prefers ESV, Noble Corp. (NE +1.2%) and Rowan (RDC +3.5%) as relative Buys for their superior fleet quality, low operating cost basis, low capex and solid backlog, while Hold-rated Ocean Rig UDW (ORIG +3.6%) and Diamond Offshore (DO +1.8%) deserve "a degree of valuation differentiation due to its highly contracted fleet in the near term."
- Also higher today: RIG +3.9%, ATW +7.1%, SDRL +2.2%, SDLP +12.3%, PACD +2.7%.
Thu, Jun. 16, 10:02 AM
- Nearly 300 employees on oil and gas drilling rigs off Norway could go on strike unless a labor deal is agreed by June 22, the country's state-appointed mediator says.
- Rowan's (RDC -2.9%) Viking and Gorilla rigs would be affected, according to one of the unions involved in the wage talks; it is not clear if other rigs would be affected.
- The Gorilla rig works for ConocoPhillips (COP -2.8%), which says the rig is engaged in the plugging of abandoned wells on its Ekofisk field in the North Sea and that oil output would be unaffected by a strike; the Viking does work for Swedish oil firm Lundin (OTCPK:LNDNF).
Tue, May 24, 7:58 AM
- Freeport McMoRan's (NYSE:FCX) oil and gas unit agrees to pay $215M to Rowan (NYSE:RDC) to immediately terminate a drillship contract.
- The agreement releases FCX from $300M in further payments under the contract for the ultra-deepwater drillship Rowan Relentless, which has been operating in the Gulf of Mexico.
- RDC also may $30M in additional contingent payments, depending on the average crude oil price over the next 12 months.
- The contract cancellation follows FCX's agreement two weeks ago to pay Noble Corp. $540M, with up to $75M in additional contingent payments, to terminate agreements for two other drillships in the Gulf of Mexico.
- The RDC contract would have ended in June 2017, and the two contracts with Noble had been scheduled to run through July and November 2017.
- FCX +1.5% premarket.
Mon, May 2, 3:45 PM
- Diamond Offshore (DO +1.4%) is higher after Q1 earnings easily exceeded analyst estimates, but it is not helping shares of other oilfield services companies in today's trade.
- Wells Fargo views DO's report positively, although results likely included noise from the accounting of a demobilization fee and notes that another contract termination in Mexico could be viewed as a partial negative offset.
- The Zephirin Group contends that DO's do not overshadow weak fundamental conditions in the offshore industry likely to persist, hurting earnings through 2018 and beyond for the likes of Noble Corp. (NE -2%) and Ensco (ESV -3.2%), which reported earnings last week (I, II).
- Zephirin rates NE and ESV at Hold - High Risk, forecasting a 30% reduction in dayrates for NE's Sam Croft and Tom Madden drillships and rate reductions of up to 25% or termination in the near future for ESV's four rigs working in Brazil for Petrobras at a day rate range of $300K-345K.
- Also: RIG -0.7%, RDC -1.4%, ATW -0.7%.
- Now read Diamond Offshore names Youngblood as new CFO
Thu, Apr. 14, 3:30 PM
- The Obama administration announces new oil well control rules aimed at preventing the kind of blowout that happened in the 2010 Gulf of Mexico oil spill.
- The regulations announced by the Interior Department tighten requirements for blowout preventers, well design, well control casing, cementing and sub-sea containment, and call for real-time monitoring, third-party reviews of equipment, regular inspections and safe drilling margin requirements.
- The effects will be particularly acute for the Gulf’s top crude oil and gas producers, Royal Dutch Shell (RDS.A +1.1%), BP (BP -1.6%), Chevron (CVX +0.1%) and Exxon Mobil (XOM +0.4%); XOM says the new rules will cost $25B over 10 years and render many offshore discoveries worthless.
- Offshore drilling stocks are broadly lower on the news: RIG -6.1%, DO -1.4%, ESV -5.1%, RDC -7.3%, NE -5.4%, ATW -9%, SDRL -8.9%, SDLP -4%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, FIF, PXJ, RYE, NDP, GUSH, DRIP, DDG, FXN
Wed, Mar. 9, 3:23 PM
- Ocean Rig UDW (ORIG -22.9%) plunges after missing Q4 earnings expectations and saying "prospects for the industry remain bleak” and “are likely to remain so at least until 2018.”
- ORIG says it is in discussions with lenders of its loan agreement related to the consequences of Ocean Rig Apollo termination, and that the situation could evolve into a "significant prepayment" of the loan.
- ORIG says its fleet operated at 99.5% utilization during Q4, and FY 2015 fleet operating efficiency was ~98.2%.
- Although ORIG’s comments were more bearish than the outlook described by other offshore drillers, the company’s earnings are hurting other names in the space: DRYS -19.6%, SDRL -16.4%, RIG -2.3%, NE -5.7%, ESV -3.9%, DO -1.4%, RDC -4.4%, ATW -3.3%.
Thu, Mar. 3, 2:58 PM
- Offshore drillers are surging today, which RBC analysts at least partially attribute to Noble Corp.'s (NE +16.1%) news that it spent $200M to buy back bonds due in 2020 and 2021, greatly reducing its debt.
- RBC estimates that NE would be able to retire ~$300M of debt principal at face value for $200M with new borrowings on the revolver, which should generate annual interest savings of ~$10M or a ~$0.03 impact to EPS.
- Ben Levisohn of Barron's also notes that oil companies in general have been able to offer stock and pay down debt, which has reduced some of the fears that the entire sector could go bankrupt, and that short interest in offshore drillers has been high.
- Also: RIG +9.9%, SDRL +11.7%, ESV +13.2%, RDC +10.5%, DO +5.9%, ATW +20%, PACD +42.6%.
Tue, Mar. 1, 10:58 AM
- Moody’s cut the credit ratings of six offshore drillers late Monday, expecting the group to face an extremely challenging operating environment through at least 2018.
- Moody's cuts Ensco (ESV -7.2%) by five notches to B1 from Baa2, saying "earnings and liquidity will decline over time as the company is compelled to rationalize its fleet to adjust to reduced demand conditions."
- Falling four notches were Atwood Oceanics (ATW -8.8%), Noble Corp. (NE -2%) and Rowan (RDC -2.1%); the ratings agency expects ATW to breach a debt covenant in 2017 and says the company is at increased risk of having to restructure.
- Debt ratings falling three notches were Diamond Offshore (DO -0.5%) and Transocean (RIG -1.8%).
Thu, Feb. 4, 11:48 AM
- Offshore drillers are on the move today as rising oil prices ease concerns about the difficult market that remains apparent in earnings releases from Noble Corp. (NE +1.1%), which reported last night, and Atwood Oceanics (ATW +17.2%), which reported earlier this week.
- NE reported below consensus Q4 earnings, but Evercore ISI's James West says the company continues to perform well operationally, with YTD unpaid fleet operational downtime edging up slightly to 5% from 4.6% in Q3.
- NE also announced plans to retire two rigs, the drillship Noble Discoverer and jackup Noble Charles Copeland, bringing its total rig attrition to four floaters and one jackup during the oil downturn.
- Jefferies says ATW has the most challenged balance sheet over the longer-term among its mid-cap coverage, but it is encouraged by ATW’s prospects to better position itself for the near-term with a covenant amendment, and maintains its Buy rating with a $9 price target (Q4 earnings).
- Related peers: RIG +3.6%, DO +3.8%, ESV +5.2%, RDC +4.3%, SDRL +2.5%.
Fri, Jan. 29, 2:57 PM
- Offshore drillers such as Transocean (RIG +2.7%), Rowan (RDC +2.2%) and Noble Corp. (NE +1.6%) are "racing toward the EBITDA cliff," lacking a compelling investment purpose until there’s either confidence in crude price recovery to $65/bbl and/or the industry scraps a large share of middle aged assets, Citigroup analysts say.
- Citi foresees no improvement in dayrates until mid-2018, and even then does not anticipate a return to newbuild economics before 2020 given ample excess supply.
- The firm views Ensco (ESV +1.6%) as the premier operator but it too should struggle, thus meriting a downgrade to Neutral; Diamond Offshore (DO +3.6%) is upgraded to Neutral, as the remaining contract backlog appears at less risk vs. peers, the balance sheet is healthy, and earnings should remain positive assuming the backlog holds.
- Citi least favorite in the group is Sell-rated Transocean, saying that if RIG's fifth generation assets are completely displaced this cycle, then the enterprise value of the company is swallowed by the debt load; the firm rates ESV and NE at Neutral.
Rowan Cos. Plc engages in the business of providing international and domestic offshore oil and gas contract drilling services. The company focuses on high specification and premium jack-up rigs, which are used for exploratory and development drilling operations. It conducts offshore drilling... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States