Fri, Jun. 12, 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.
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, Jun. 2, 6:15 PM
- Half a loaf is better than no loaf at all, as investors pushed shares of offshore drilling contractors to strong gains in today's trade after Hercules Offshore (NASDAQ:HERO) said Saudi Aramco would keep three rigs working but at roughly half the previous dayrates.
- Cowen analysts offer a rather negative take, saying rate reductions were expected, but given the quality of its rigs and its difficult negotiating position, HERO received the harshest rate reductions among its peers; also while competitor contracts will revert to their original dayrates in early 2016, HERO’s rigs will be on the lowered rate through the end of 2016.
- Meanwhile, Atwood Oceanics (NYSE:ATW) received a month-long extension on one of its rigs, which prompts Susquehanna to boost its 2015 EPS outlook to $7.40 from $7.37 but maintain its Neutral rating and $32 stock price target.
- In today's regular session: HERO +6.1%, ATW +2.5%, RIG +3.7%, SDRL +4.2%, NE +4.7%, RDC +5.1%, DO +4.2%, ESV +4.5%, HP +2.5%, PKD +3.3%.
Fri, May 29, 3:57 PM
- Rowan (RDC -1.5%) stands out in the otherwise troubled offshore drilling contracting sector, J.P. Morgan analysts say, highlighted by its mix of incumbent jackups, strong high-spec UDW contract coverage and minimal newbuild capex.
- But JPM sees trouble for most of the other names in the group, with dayrates and utilization likely continuing to trend downward for both floaters and jackups as demand remains tepid and supply growth from newbuild deliveries outstrips fleet attrition.
- While JPM assigns RDC an Overweight rating and a $26 price target, it Underweights Ensco (ESV -2%), Noble (NE -2.1%) and Transocean (RIG -0.7%), citing strong leverage to asset classes, regions or customers that could prove challenged; Neutral-rated Diamond Offshore (DO -0.9%) faces similar challenges but the firm thinks more of the bad news is priced into its shares.
- The firm believes the recent run in the sector is commodity-driven short covering and likely to prove fleeting.
- Earlier: Halliburton, Schlumberger stand out in battered oil services, J.P. Morgan says
Wed, May 27, 5:07 PM
- Transocean (NYSE:RIG) says Esa Ikaheimonen is resigning as Executive VP and CFO and as Chairman of Transocean Partners (NYSE:RIGP), effective immediately.
- He will be replaced by Mark Mey, who is leaving Atwood Oceanics (NYSE:ATW) as Executive VP and CFO; ATW says it temporarily appointed chief accounting officer and controller Mark Smith to Mey’s old position.
- No reason was given for Ikaheimonen's sudden departure.
Wed, May 27, 10:45 AM
- Offshore drillers have enjoyed a 27% bounce off their March lows but investors should not buy the "head fake" in the stocks, RBC analysts warn, believing the rally was driven mostly by short covering rather than a sustainable shift in offshore fundamentals.
- RBC continues to expect the market to be oversupplied into 2017, and sees more rigs rolling off contracts than are signed up for new work through H2 2015; the firm does not foresee a bottom in the global offshore floating rig count until Q2 2016 since the velocity of offshore spending is much slower than land, and it will take some time for rigs to be put back to work even as oil prices rise in H2.
- The sector is mostly lower, extending yesterday's sharp losses: SDRL, which reports earnings tomorrow, -0.4%, RIG +0.1%, ESV -0.4%, ATW -0.3%, DO -0.4%, RDC -0.1%, NE -0.1%, PACD -1.7%.
Thu, May 21, 12:45 PM
- Transocean (RIG +4%) powers higher a day after reaching an agreement with BP (BP +2%) that could finally put claims from the 2010 Deepwater Horizon oil spill behind it.
- The settlement is excellent news that immediately reduces a major element of uncertainty for RIG and eliminates a huge overhang on the company's balance sheet and cash flow statements, Zephirin Group says, adding that it incrementally adds to current liquidity of ~$5.6B.
- Zephirin reiterates its Strong Buy rating and $34 price target after shares have dropped 79% since the spill.
- Shares of Halliburton (HAL +2.9%), which also agreed to settle remaining spill-related claims with BP, also are higher.
Wed, May 20, 6:03 PM
- Transocean (NYSE:RIG), owner of the rig that sank in the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, joins Halliburton in settling all remaining issues with BP.
- BP agrees to pay RIG $125M in compensation for legal fees, and will discontinue its attempts to recover as an “additional insured” under RIG’s liability policies; the two companies will mutually release all claims against each other.
- RIG agrees to pay $212M to two classes of plaintiffs represented by a committee in the spill-related litigation.
- Earlier: Halliburton, BP agree to settle Deepwater Horizon claims
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, 7:45 PM
- Goldman Sachs had a lot to say about all corners of the energy sector today in addition to the cut in its long-term oil price forecast, its Sell recommendations for oil majors BP, Statoil (NYSE:STO) and Chevron (NYSE:CVX), and its gloomy outlook for offshore drillers Transocean (NYSE:RIG), Diamond Offshore (NYSE:DO) and Atwood Oceanics (NYSE:ATW).
- Goldman awards a Buy rating for Exxon Mobil (NYSE:XOM), "the only U.S. or European major that can generate sufficient free cash flow to cover its dividend near $60/bbl in 2016-17"; while the firm says other oil majors will be struggling to keep the dividend flat, XOM will be in a position to increase the dividend for the next several years.
- With its expectation for long-term weakness in oil and gas prices, Goldman sees risk exposure in many names that are reliant on commodity prices, suggesting selling LINE, DPM, NGLS, while predicting PAGP and NS would benefit from a removal of the U.S. crude oil export ban.
- The firm thinks many midstream MLP names now offer attractive valuations, recommending ENB, EPD, ETE, PAA, SXL, WNRL.
- Goldman sees an upturn for frac sand provider Emerge Energy (NYSE:EMES), upgrading shares to Buy from Neutral.
- Other Buys: CLR, NFX, CQP, HEP.
- Other Sells: TRP, TCP, GPOR, MUR, GTE
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%.
Thu, May 7, 5:25 PM
- Transocean (NYSE:RIG) ripped through its Q1 earnings estimates but shares fell 3.6% in today's trade, swept away along with most other energy companies as U.S. crude oil prices tumbled back below $60/bbl.
- But some analysts say RIG could have been the victim of a classic case of "buy the rumor, sell the news" after shares had gained 40% since March 13 heading into earnings.
- Analysts at Clarkson Capital believe RIG has "received more than enough credit over the past month to account for solid operational performance in Q1," urging investors not to chase the stock at current levels.
- Cowen's J.B. Lowe thinks today’s price action was "an awareness that there are no other major drillers to report upside earnings surprise (except Seadrill)... and that the recent run up in share prices has been too much too quickly."
- Other oil drillers also finished broadly lower: RIGP -4.3%, SDRL -6.8%, NE -6.6%, DO -4.6%, ESV -6.1%, RDC -2.9%, ATW -5.8%, PACD -8.7%.
Wed, May 6, 9:56 PM
- Transocean (NYSE:RIG) +1.3% AH after reporting Q1 earnings that easily beat analyst estimates thanks to lower costs in coping with the drop in drilling demand.
- The adjusted results do not include a $481M impairment from its Deepwater Floater asset group and $393M in impairments of assets classified as held for sale.
- RIG says Q1 capital expenditures fell 37% Q/Q to $201M due primarily to lower project costs on the existing fleet, while operating and maintenance expenses fell 17% to $1.08B; says it expects to spend ~$1.8B this year on capital projects vs. $2.17B in 2014.
- Q1 fleet revenue efficiency was 95.9% vs. 95.3% in Q4 2014, with revenue efficiency on ultra-deepwater rigs of 97.2% vs. 95.4% in Q4; fleet utilization was 79%, up from 73% in Q4.
- RIG is recommending shareholders next week approve a cut in the annual dividend to $0.60/share from the current $3, which was instituted after calls from billionaire investor Carl Icahn.
Wed, May 6, 5:29 PM
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%.
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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