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Jun. 22, 2015, 2:56 PM
- Offshore drilling contractors are higher despite negative commentary from Barclays, which says Transocean (RIG +1.7%), Noble Corp. (NE +0.8%) and Ocean Rig UDW (ORIG +0.6%) are most susceptible to the market's biggest long-term threat: Too few rigs are being taken out of service.
- With few rigs designated for the scrap yard, the firm makes its own assumptions, with RIG (15 floaters) and Diamond Offshore (DO +1.6%) contributing most to rig retirements over the next 12-18 months.
- Depending on the fate of Ensco’s (ESV +1.4%) 8500 series rigs, distributable cash flow swings from $27/share (if the rigs are stacked but return) to $18/share (if all six are retired), Barclays calculates.
Jun. 19, 2015, 12:48 PM
- The bad news facing offshore drillers such as Transocean (RIG -1.4%), Seadrill (SDRL -2%), Ensco (ESV -1.2%) and Noble Corp. (NE -2.3%) convince Wells Fargo to remain bearish on the sector.
- The firm says the last 48 hours have produced a "golden sombrero" for the offshore drilling sector with Hercules Offshore filing for bankruptcy, Chevron (CVX -0.6%) reportedly canceling a high profile ultra-deepwater tender in the Gulf of Mexico, and ESV and NE each disclosing notably negative fleet status reports.
- Wells rates ESV and NE at Market Perform, but RIG and SDRL are rated Underperform; RIG faces “significant risk to global floater market deterioration and funding risk balancing newbuild payments and debt maturities," while SDRL's high quality fleet is outweighed by "significant funding risk for debt repayments and newbuild commitments.”
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. 15, 2015, 11:53 AM
- Transocean (RIG -0.3%) is maintained with a Negative rating and $14 price target at Susquehanna, but the firm raises its estimates for EPS and EBITDA to reflect a cost structure that is more consistent with a lower level of utilization.
- Given the increasing number of cold-stacked rigs that will be removed from RIG’s operating fleet, the firm believes future unexpected downtime should decrease, as newer rigs are less susceptible to maintenance as well as the reduced need for older rigs to incur special survey upkeep costs.
- However, the firm says the improvement in the operating cost structure does not change the fact that RIG's operations will be burdened by its current debt profile and committed capital requirements for the next few years, compounded by an aging fleet trying to compete with newer assets in an oversupplied industry.
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.
Jun. 2, 2015, 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%.
May 29, 2015, 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
May 27, 2015, 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.
May 27, 2015, 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%.
May 21, 2015, 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.
May 20, 2015, 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
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 18, 2015, 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
May 18, 2015, 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
May 12, 2015, 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%.
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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