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%.
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%.
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%.
Fri, May 1, 6:49 PM
- Despite evidence that at least some offshore drillers such as Ensco (NYSE:ESV), Atwood Oceanics (NYSE:ATW) and Noble Corp. (NYSE:NE) are holding up fairly well in the turmoil created by lower crude oil prices, some analysts are not convinced.
- Credit Suisse's Gregory Lewis believes short covering counts for much of ESV’s big gain yesterday, and believes the company remains one of the offshore drilling laggards because of its near term floater contract roll-off schedule and jackup exposure.
- RBC's Robert Pinkard likes ESV's strong operational quarter but thinks the offshore group is not yet out of the woods, and sees a very competitive contracting environment for at least the next 18 months, which should continue to pressure rates and utilization.
- Cowen analysts, however, step up for NE, raising their earnings estimates as they rate shares at Outperform with a $22 price target, up from $20; with only three of NE’s 12 ultra-deepwater floaters rolling off contract at or before the end of 2015, the firm believes "the new Noble is one of the best-positioned offshore contract drillers."
Thu, Apr. 30, 11:48 AM
- Ensco (ESV +4.1%) and Atwood Oceanics (ATW +5.8%) are sharply higher following their strong Q1 earnings reports (I, II), even though neither company sees the offshore drilling environment getting much better soon.
- Cowen analysts note that management commentary on the outlook for the offshore drilling sector remains gloomy as the current downturn looks to be extending well into 2016, but says ESV’s recent ability to refinance $1.1B of debt speaks to the company’s "strong positioning amongst its peers as one of the premier offshore contract drillers."
- Meanwhile, ATW also enjoyed a "great quarter" but challenges remain, including lower rig utilization and pricing, according to Credit Suisse.
Wed, Apr. 29, 5:17 PM
Tue, Apr. 28, 5:35 PM
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Tue, Apr. 28, 11:31 AM
- Contract cancellations are the biggest risk for offshore drillers, according to Cowen analysts, who expect backlog quality will comprise the sector's main focus this earnings season.
- With operators cancelling contracts for convenience or by using an unforeseen event to eliminate backlog from the end of contracts, even signed contracts have been shown to be at risk to cancellation, and Cowen expects operators will continue to seek ways to get out of existing contracts or amend current contracts to more favorable terms wherever possible.
- "The incremental, unforeseen loss of backlog from existing contracts will likely drive further estimate reductions and share price weakness across the group," the firm says.
- Relevant tickers: SDRL, ATW, ESV, RIG, RDC, DO, NE, PACD, PKD.
Tue, Apr. 21, 11:48 AM
- Raymond James doubles down on its negative outlook for offshore drilling contractors, as the firm cites the lack of new contracts and the need for a much more significant move in oil prices to materially change the sector's landscape.
- The firm says the current contracting rate trends well below its expected pace and even below 2009 levels as the desire to pursue further activity skids to a halt, and believes that 2016 consensus estimates have substantial room for downward earnings revisions; including contract cancellations, the sector actually experienced negative incremental demand during the Q1.
- Raymond James sees the average offshore rig count declining by 13% in 2016 and a further 4% in 2017; even with cost-cutting efforts, it expects the average uncontracted rig to lose money as leading edge dayrates will flirt with risked breakeven levels with only minimal recovery in the next two years given the levels of excess supply.
- Offshore drillers are lower today: ORIG -5.8%, RIG -4.5%, SDRL -4.1%, NE -2.8%, ESV -2.8%, DO -2.1%, ATW -2.1%, PACD -2%, RDC -1.9%.
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%.
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