Fri, Apr. 17, 11:46 AM
- Transocean's (RIG -2.3%) rigs are "dropping like flies," Credit Suisse says as it reiterates its Underperform rating and $12 stock price target after RIG's latest fleet status report revealed it had a contract terminated early and had decided to scrap yet another rig.
- RIG's scrapping of the GSF Explorer, which last worked in November 2014 at $412K/day, boosts the number of floaters the company intends to scrap to 19, up from 11 at the end of 2014; early termination of the Sedco Energy raises RIG’s idle floater count to six.
- RIG expects scrapping the GSF Explorer will result in a Q2 non-cash charge of $100M-$120M.
- Offshore drilling contractors are broadly lower, particularly Atwood Oceanics (ATW -4.1%) after Chevron shortened its contract term for one of its drilling units; also DO -2.2%, PACD -2.1%, NE -1.5%, ESV -0.6%, RDC -0.2%, SDRL +0.3%.
Thu, Apr. 16, 10:58 AM
- Ensco (ESV -4.8%) reveals in its April fleet status report that it agreed to lower dayrates on seven of its jackups working for Saudi Aramco in the Middle East, with reductions ranging 10%-20% and an average decline of 15% across the seven rigs.
- Cowen analysts believe further rate negotiations are ongoing and could affect other operators with units contracted to Saudi Aramco, noting that Rowan (RDC -4.2%) may be the most exposed since it has nine rigs currently working with Aramco; RDC secured three-year contract extensions in Sept. 2014 on four of the jackups, which could see reductions, as well as four units currently under negotiation extensions.
- Other contractors with units working for Aramco are Noble Corp. (NE -4.9%) with four units, Hercules Offshore (HERO -3.9%) with two (after the termination of the Hercules 261), and Seadrill (SDRL -3.9%) with three.
- Other offshore drilling contractors also are lower: RIG -3%, ATW -2.3%, DO -4.1%, HP -2.7%, ORIG -2.5%, PACD -4.2%.
Thu, Apr. 2, 12:36 PM
- Transocean's (RIG +1.3%) plans to scrap two more offshore rigs are just the latest of 32 floating rigs that have been designated for retirement over the past six months, and Cowen analysts foresee at least 100 units removed from supply over the next two years before the market is balanced.
- Cowen also expects a majority of currently uncontracted newbuilds will have their deliveries pushed out beyond 2016, as the rig owners wait for demand to perk back up in 2017 and beyond; highlighting this trend was Atwood Oceanics' (ATW +0.8%) news that it may delay deliveries of its last two uncontracted newbuilds by up to a year, in addition to the six month delay already in effect.
- Though still cautious on the offshore drilling sector, Cowen prefers Noble Corp. (NE +1.3%) and ATW on a relative basis, citing high quality fleets, superior contract coverage through 2016 and strong free cash flow generation; the firm avoids RIG and Diamond Offshore (DO +0.2%) as their fleets will be the most challenged to secure work in the current market environment.
Thu, Mar. 19, 2:26 PM
- It's a rough day for offshore drilling contractors following Transocean's (RIG -7.1%) announcement last night that it will scrap four rigs and stack four more it previously had idled, taking a $300M-$325M charge.
- Most notably, the Deepwater Expedition, which was working for $650K/day in 2014, will be scrapped; overall, the number of rigs the company plans to scrap is now 16, with possibly more to come.
- RIG was awarded a $300K/day contract for one rig for work off the coast of Nigeria, and idles another rig.
- In cutting its stock price target to $16 from $17, RBC expects just 10%-20% of available rig days will be contracted eventually given current market conditions vs. Wall Street expectations for ~35%.
- Also: ESV -4.3%, NE -5.3%, RDC -0.6%, DO -3.1%, SDRL -2.4%, ATW -5.7%, PACD -4.5%, HP -1.8%.
Thu, Mar. 12, 5:48 PM
- While energy E&Ps are out aggressively raising equity, major drillers have little choice but to strengthen their balance sheets; on the heels of Ensco’s (NYSE:ESV) successful bond issuance last week, this week Noble Corp. (NYSE:NE) is looking to strengthen its balance sheet.
- Transocean (NYSE:RIG) has $900M due later this year followed by $1B in 2016, $750M in 2017, and $1.2B in 2018, but Credit Suisse notes that while RIG’s 2018 paper is yielding ~7%, the 2020 and beyond paper is yielding 9%-10% less than ideal; RIG has a $3B revolver which provides flexibility and could keep it on the sidelines.
- Seadrill (NYSE:SDRL) has $350M due later this year and "while it has a lot of work ahead of it... the majority of [its] debt is bank debt"; SDRL medium term debt is yielding 10%-plus.
- Drillers that have attractive pricing from a management perspective - Rowan (NYSE:RDC), Atwood Oceanics (NYSE:ATW) and Diamond Offshore (NYSE:DO) - do not have near-term maturities, Credit Suisse says.
Tue, Mar. 3, 12:32 PM
- In a discussion of big energy companies cancelling contracts with offshore drillers, Credit Suisse analyst Gregory Lewis notes that national oil companies such as Petrobras sometimes end deals for the sake of convenience, and that drillers with lots of exposure to state-run companies are vulnerable.
- Most drillers have a core customer: Lewis says Shell (RDS.A, RDS.B) comes to mind for Noble Corp. (NYSE:NE) with ~47% of 2015 backlog and Chevron (NYSE:CVX) for Transocean (NYSE:RIG) with ~15% of 2015 backlog.
- But among those with the most exposure to national oil companies on their 2015 contracted revenues, Lewis says Diamond Offshore (NYSE:DO), Seadrill (NYSE:SDRL) and Ensco (NYSE:ESV) are at the top, while Pacific Drilling (NYSE:PACD) and Atwood Oceanics (NYSE:ATW) have none.
Fri, Feb. 27, 12:45 PM
- Hercules Offshore (HERO -28.2%) shares are crushed after this morning's downgrade to zero by Deutsche Bank analyst Mike Urban, who had maintained a Buy rating on the oil drilling services company for more than two years.
- Urban says he had remained positive on HERO relative to his negative view on the offshore driller sector because he did not foresee a lot of new competition to enter the shallow Gulf of Mexico area where the company had a commanding market position; that dominant position is no longer enough, he says, because "the collapse in oil prices has eviscerated demand.”
- Other stocks in the sector are rising today: RDC +3.6%, ATW +2.5%, RIG +2.4%, DO +2%, PKD +1.6%, HP +1.3%, ESV +1%.
Thu, Feb. 26, 2:32 PM
- Offshore drillers are warning that the number of deepwater rigs stacked or scrapped is set to hit a two-decade high, and predicting that the industry slump caused by lower crude oil prices could last another two years.
- Seadrill (SDRL -2.2%) said today that the severity of the downturn and extent of oversupply was such that ~25% of the rigs would come available for hire this year, and that industry decisions regarding the cold stacking and scrapping of older units likely would accelerate to levels not been seen in two decades (Q4 earnings).
- Transocean's (RIG -1%) Q4 results were not as bad as expected, but Senior VP Terry Bonno warned today that the company “continue(s) to expect challenging conditions... [with] extended periods of inter-contract idle time and significant competition for the limited tendering opportunities available."
- Dayrates for advanced, deepwater rigs have tumbled from a peak of ~$650K two years ago to $350K-$400K, with contractors slashing prices in the face of dwindling exploration.
- Also: ESV -7.3%, RDC -3.4%, DO -4.3%, ATW -5.1%, PACD -9.1%, HERO -13.6%.
Tue, Feb. 24, 2:22 PM
- Offshore drillers are sinking again after Diamond Offshore (DO -8.3%) disclosed that it probably would lose some contracts; also, Transocean Partners (RIGP -7.5%), the MLP created by Transocean (RIG -1.9%), was downgraded to Underweight with a $16 price target, cut from $26, at Barclays.
- RIGP, which is set to release Q4 results tomorrow after the close, is not at risk of cutting its dividend but faces uncertainty in light of lowered demand for offshore drilling rigs, Barclays says, but that RIGP likely would not be able to increase its distribution if the semi-submersible DDIII were to begin operating at recently observed market rates.
- DO is reiterated at a Sell rating with a $23 price target at Deutsche Bank.
- Also: SDRL -2.7%, SDLP -2.8%, ESV -6.5%, RDC -4.3%, NE -4.7%, ATW -5.8%, PACD -5.2%.
Mon, Feb. 23, 11:48 AM
- Transocean (RIG -2.3%) is slumping as Susquehanna downgrades the stock to Negative from Neutral with a $12 price target, cut from $15; RIG also is caught up in today's falling crude oil prices on concerns over the global supply glut.
- The firm is concerned over the competitive positioning of RIG’s assets to receive tenders, which will be compounded by the industry's weak macro environment; it says the "day of reckoning" for RIG’s old offshore drilling rigs has arrived, with the average age of the company’s floaters at 20.7 years vs. the industry average of 17.6 years.
- Given the challenges, the firm sees EBITDA declining 47% in 2016 and risking further downside in 2017 if the large number of contracts set to roll off are not renewed.
- Offshore drillers are broadly lower: ESV -3.2%, RDC -2.4%, SDRL -2.7%, NE -2.1%, ATW -1.3%, DO -0.5%.
Wed, Feb. 4, 5:33 PM
- Offshore drillers fell sharply today along with crude oil prices even after Atwood Oceanics (NYSE:ATW) released FQ1 earnings that beat Wall Street consensus; ATW fell 0.7% in regular trading while peers all lost at least 3%.
- Credit Suisse says ATW enjoyed a solid quarter, "but the outlook is all that matters," with contracting the ATW Admiral newbuild, which is scheduled for delivery in September, the key focus; the firm thinks getting the rig on contract, regardless of rate, would push the stock higher.
- Cowen analysts think ATW, Noble Corp.(NYSE:NE) and Pacific Drilling (NYSE:PACD) are best positioned to survive an extended period of weakness; NE has 72% of its available floating rig days contracted in 2015, and 48% contracted in 2016. - a solid backlog, particularly considering it has not yet chosen to stack or retire a significant number of rigs, as its peers Transocean (NYSE:RIG), Ensco (NYSE:ESV) and Diamond Offshore (NYSE:DO) have done.
- Offshore drillers are seen as some of the first casualties of oil price declines, as they have less flexibility in costs than oil explorers and depend on market-sensitive dayrates to generate revenue with their rigs.
Tue, Feb. 3, 6:30 PM
Tue, Feb. 3, 2:59 PM
- Diamond Offshore (DO +2.8%) is downgraded to Underweight from Equal Weight at Morgan Stanley, which cites the potential for a dividend cut and an earnings miss.
- The firm believes the dividend suspension by Seadrill paves the way for peers to evaluate their current payout strategy, and now expects DO to cut its elevated yield on Feb. 9; it also cuts its estimated 2015-16 EPS from $3.05 and $1.63 to $2.68 and $0.92 - well below the Wall Street consensus of $2.92 and $1.62 - although earnings risk probably is well appreciated at this point.
- Stanley says “a new reality has set in” for offshore drillers generally, and foresees "a larger supply response to right-size marketed fleet utilization, and expect accelerating fleet attrition and newbuild delivery delays to materialize on the back of lower dayrates."
- Related tickers: SDRL, SDLP, RIG, RIGP, ATW, PACD.
Mon, Feb. 2, 5:35 PM
Mon, Jan. 12, 12:48 PM
- Goldman Sachs lowers target prices for several offshore drillers as it cuts its crude oil price outlook, although it still rates Atwood Oceanics (ATW -3.3%) a Buy.
- The firm expects offshore driller stocks to struggle with a supply/demand imbalance driven by the 62 newbuild floaters and 113 jackups coming to the market through 2016 (24% and 28%, respectively, of the working rig count), on top of weak demand, and sees demand curtailed as projects are delayed, resulting in declining utilization for offshore rigs and lower earnings for the majority of offshore drillers as rigs rolling off contracts could struggle to find contracts.
- ATW is Goldman's lone Buy-rated name due to high contract coverage, a young rig fleet and favorable valuation; Sell-rated Transocean (RIG -4.6%) and Diamond Offshore (DO -4.9%) have high rig availability, exposure to aging assets, potential for asset writedowns, and risks to their current dividend payments.
Dec. 23, 2014, 6:55 PM
- Goldman Sachs' David Kostin thinks it’s time for patient investors with at least a 12-month time horizon to begin loading up on energy companies.
- The Goldman team recommends refiners such as Marathon Petroleum (NYSE:MPC) and Phillips 66 (NYSE:PSX), as well as midstream companies that are less sensitive to oil prices and offer the potential for dividend growth, including EQT Midstream Partners (NYSE:EQM), Kinder Morgan (NYSE:KMI) and Cheniere Energy (NYSEMKT:LNG).
- With capital spending sure to take a hit and oil prices likely to remain volatile, oil service companies probably aren’t the way to go, but Goldman considers the more defensive names such as Atwood Oceanics (NYSE:ATW), Schlumberger (NYSE:SLB) and Oceaneering (NYSE:OII) as the best of a bad lot.
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