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Dec. 8, 2015, 2:57 PM
- Despite being “bereft of positive data points," offshore drillers such as Transocean (RIG +0.5%) and Noble Corp. (NE +0.5%) are beginning to see some interest from investors, JPMorgan’s Sean Meakim says.
- Even while seeing "some long-only buying of offshore shares on our desk recently (first time in a long while)," Meakim is not too excited, adding that "even if offshore driller stocks rally in sympathy with a sustained commodity rally in 2016, we’d expect them to lag onshore shale considerably."
- On Underweight-rated RIG, the analyst says the company has the most contract renewal exposure near-term within the group, with ~60% of its fleet rolling off (~50% of revenue) contracts through H1 2016, but "the fresh perspective in new leadership" from CEO Jeremy Thigpen and Chairman Pete Miller could prove a long-term positive.
- Meakim also remains Underweight on NE, which has performed admirably in the downturn but "cost cuts have largely run their course and the balance sheet looks much more stressed into 2017-18 on our numbers."
Dec. 7, 2015, 12:19 PM
- Transocean (RIG -2.2%) says the harsh environment floater Henry Goodrich was awarded a two-year contract with Husky Oil offshore Canada at a dayrate of $275K, below the rig's prior $347K-$476K dayrate range but above RIG’s Q2 2015 average cost of $147K/day for the harsh environment floater fleet.
- RIG says its current backlog stands at $16.8B, down slightly from $16.9B as of Oct. 26 as the company continues to burn through backlog faster than its signing new contracts, Evercore analysts say, as they continue to rate RIG as a Sell.
- RIG shares are lower but far less than most energy companies, which are taking a beating today as crude oil prices slide to multiyear lows.
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.
Nov. 25, 2015, 5:38 PM
Nov. 24, 2015, 5:39 PM
Nov. 23, 2015, 12:34 PM
- Transocean (RIG +0.8%) says it will delist from the SIX Swiss Exchange in Q1 2016 to save on costs, while continuing to trade on the NYSE.
- RIG will remain incorporated in Switzerland but says it is not in its best interest to be listed on two exchanges "due to the expense and effort associated with multiple listing locations."
- RIG's 2010 listing in Switzerland had been the biggest debut on the Swiss exchange in more than a decade.
Nov. 6, 2015, 11:43 AM
- Transocean (RIG -0.8%) is maintained with an Underweight rating and a reduced price target of $10 at J.P. Morgan, which says that although the company’s Q3 earnings exceeded expectations, the results were not as good as peers and secular headwinds will continue to impact performance.
- RIG’s cost beat of 3% was much lower than the peer average of ~8%, analyst Sean Meakim says, as RIG delayed delivery on two Shell drillships, "resulting in a mostly neutral impact on liquidity."
- RIG guided to a 25%-30% Y/Y decline in operating expense in 2016, but attributed ~80% of savings to reduced activity levels; JPM calculates that 2017 projected liquidity of $4B-$5B implies a cash burn of $200M-$1.2B, which translates to an annual CFO of $1.4B-$1.8B.
- “While the liquidity forecast is in line with past commentary and achievable in our view, the means of arriving there looks significantly more painful when coupled with the opex guidance," Meakim writes.
Nov. 5, 2015, 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%.
Nov. 4, 2015, 6:18 PM
- Transocean (NYSE:RIG) reports a 10% Y/Y drop in Q3 earnings and a 29% decline in revenue, but both figures beat analyst expectations, which the company says was driven by its focus on managing costs and making reliable equipment.
- RIG says it collected less revenue for its contract drilling services in Q3, with average daily revenue for its fleet slipping to $385.3K from $403.1K a year ago.
- RIG also says fleet utilization fell to 70% from 75% in the previous quarter and the year-ago period, demonstrating declining usage of its ultradeep-water floaters, harsh environment floaters and high-specification jackups.
- Operating and maintenance expenses fell by $105M Q/Q largely due to the drop-off in activity.
- Capital spending surged to $940M in Q3 from $195M in Q2, driven by the final shipyard payment for the ultra-deepwater drillship Deepwater Thalassa, which was delivered in September.
- RIG -0.3% AH.
Nov. 4, 2015, 5:30 PM
- Transocean (NYSE:RIG): Q3 EPS of $0.87 beats by $0.19.
- Revenue of $1.61B (-29.1% Y/Y) beats by $20M.
- Shares -2% AH.
Nov. 4, 2015, 10:18 AM
- An unusually high 13 rigs competing for a Det Norske drilling contract on the Alvheim oil field in the North Sea provides an illustration of how rig companies are desperate for business as producers cut spending to cope with weak crude oil prices, Blomberg reports.
- Offshore drillers such as Transocean (NYSE:RIG), Seadrill (NYSE:SDRL) and Fred Olsen Energy (OTC:FOEAF) have been caught by falling demand for their services as well as a glut of new rigs coming into the market, while Statoil (NYSE:STO), Norway's dominant oil company, has cut the equivalent of four years of drilling by terminating and suspending rig contracts over the past 18 months.
- Analysts say the daily rental rate for Det Norske’s rig will be lower than a recent award to Odfjell Drilling, which will get ~$300K/day to drill on STO’s Johan Sverdrup field for three years.
Nov. 3, 2015, 5:35 PM
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Nov. 2, 2015, 3:45 PM
- Statoil's (STO +0.8%) cancellation of a contract for a Songa Offshore (OTC:SGAZF) rig four months early is the latest blow for North Sea-focused companies including Transocean (RIG +5.8%), Seadrill’s (SDRL +4.2%) North Atlantic Drilling (NADL +4.2%) unit and Fred Olsen Energy (OTC:FOEAF), which have floating rigs idling or completing offshore contracts in the country in the coming year.
- By the time the market turns, as many as 20 units in Norway and the U.K. may be scrapped, Janne Kvernland of Nordea Markets tells Bloomberg.
- Investment by oil companies in Norway is expected to fall 11% this year and another 8% next year, according to the Finance Ministry, and demand for offshore rigs in Norwegian waters likely will total 18-20 units next year, with the equivalent of 27 rigs available.
Oct. 29, 2015, 11:05 PM
- The five Gulf of Mexico states reach a settlement with Transocean (NYSE:RIG), the owner of the offshore drilling rig involved in the 2010 BP oil spill, leading to the official dismissal of federal lawsuits against the company.
- Alabama Gov. Bentley said last week that RIG would pay the state $20M to resolve legal claims; documents from the other states this week indicate Louisiana will get $4M, Texas $2M and Florida $5M, while Mississippi's share has not been released.
- Settlements announced earlier this year between BP and the states, which also involved the Justice Department, are estimated to be worth more than $20B.
Oct. 27, 2015, 10:48 AM
- Transocean (RIG -0.3%) is only slightly lower after its latest fleet status update showed the offshore drilling contractor stacking several more rigs as it continues to cope with a prolonged industry downturn.
- Susquehanna maintains its Negative rating and $11 price target on the shares even as the firm slightly raises its 2016 earnings estimate, as one rig earned three months of work from a contract transfer that raises the likelihood of receiving additional work.
- "Despite alleviation of liquidity concerns in the near-term, RIG’s preemptive fleet reduction from cold-stacking and secular headwinds exposes it to possible further downward revisions," the firm writes.
- RIG says it will no longer publish monthly interim fleet updates, and will begin issuing quarterly fleet reports in Q1 2016.
Transocean Ltd is an international provider of offshore contract drilling services for oil and gas wells. The Company has two operating segments; contract drilling services and drilling management services.
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