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Diamond Offshore: Overpriced Or Take-Private Candidate?
- DO is a study of contrasts - highly valued, yet poorly contracted (though the under construction rigs are contracted).
- The only major driller to increase in value during December.
- Lowes Corp owns more than 50% and has been buying.
- Bonds yield a modest 4%, implying stability and no perceived bankruptcy risk.
Diamond Offshore Drilling: New Fleet Analysis As Of December 16
- Diamond Offshore Drilling released its fleet status December 16. It is time again to look seriously at the company's situation.
- Oil price plunged again recently to a record low, not seen since 2009. The offshore drilling industry is now suffering and DO is not an exception.
- The fleet analysis is an important indicator for investors because it shows first hand if the company can weather this punishing cycle that will last probably until Q3 2015.
- Diamond Offshore has several rigs going off-contract in 2015 in a market where re-contracting is challenging.
- Oil prices are unlikely to recover soon on no production cut and weak global economy. This will keep sentiment negative for offshore drillers.
- Diamond Offshore's existing fleet has several old rigs and that makes contracting even more challenging.
- New rigs for delivery in 2015 can offset cash flow decline from weak markets. However, exposure is advisable only after the oil price shows some stability from the current free fall.
- Fleet transformation will make Diamond Offshore attractive once oil prices and the offshore drilling market recovers.
- Tables of the top insider purchases and sales filed with the SEC on 12/9/14, based on dollar value.
- Dollar values often do not equate with significance when it comes to insider trades.
- Proprietary Insider Company Ratings are relayed to clarify significance.
- While Diamond Offshore stock has been falling, it is outperforming peers on a relative basis.
- Strong insider buying may indicate future dividend policy.
- Contract coverage in the key ultra-deepwater sector is strong.
- Diamond fleet has no new build rigs without contracts and low exposure to the jack-up market.
Diamond Offshore - At Its Cheapest Valuation Ever?
- Based purely on relative fundamental valuations, Diamond Offshore has never been cheaper the last 25 years since the company’s formation.
- The panic selling of crude oil assets is completely overdone and lacking serious merit, or it is presaging an implosion in the world’s economy into 2015.
- A fair value projection today based on 2014 results, using 10-year average price to earnings, cash flow, sales and book value comparisons is $70 a share.
Diamond Offshore Drilling: New Fleet Analysis As Of November 19 And Commentary
- Diamond Offshore Drilling released its fleet status November 19. It is time again to look seriously at the company's situation.
- The offshore drilling industry has been particularly affected by the recent dramatic retreat in oil prices. Many E&P operators have significantly reduced their investments recently.
- Diamond Offshore is a well-managed company; however, the midwaters class represents 38% of the company fleet, and these rigs will be retired in the near future.
Diamond Offshore Drilling: Fleet Analysis As Of October 24 And Third Quarter Results
- Diamond Offshore Drilling released its third-quarter results and provided a new fleet status on October 23. A surprising fleet status which is adding $2.4 billion in new contract backlog.
- Diamond Offshore ability to ink new long-term contracts in this challenging environment is very impressive. However, this fact came with a new low day-rate of $400k and no mobilization fee.
- The stock has recovered well from its recent lows and presents a decent outlook for 2015 after contracting its new UDW fleet. I raise the stock from HOLD to accumulate.
Diamond Offshore Drilling - Results Are A Great Indicator Of Sector Health
- Diamond Offshore Drilling Inc was the first offshore driller to report results.
- Diamond's results are indicative of wider sector trends.
- The sector continues to perform well despite recent share price performance.
Diamond Offshore Drilling: Thoughts From Q3 2014 Earnings And Future Outlook
- Diamond Offshore continues its pattern of beating analyst expectations.
- Diamond Offshore current dividend yield stands at 8.97%.
- Diamond Offshore maintains the best corporate debt rating in the offshore drilling industry.
- Diamond Offshore is not the best investment choice when offshore markets recover.
- The company has low contract coverage and a relatively low specification fleet as compared to peers.
- The company's growth prospects for 2014 and 2015 are relatively gloomy as compared to peers.
Diamond Offshore Drilling: New Fleet Analysis As Of September 16 And CommentaryFun Trading • Tue, Sep. 30
- Diamond Offshore is a solid top-tier offshore driller; however, the company presents some fleet weaknesses, when we look at the last fleet status, released on September 16.
- The floaters' market, particularly, is getting now more challenging for the older rig generation, and day rates are going down.
- The offshore industry has dropped significantly in a few weeks and Diamond offshore presents now an evident trading opportunity, after a drop of 36% since January.
How Much Further Will Diamond Offshore Drilling Fall Before Finding Support?
- Diamond Offshore's outlook is deteriorating.
- The company's shares might find support at book value.
- Diamonds shares currently trade at a premium to book and could fall by a double-digit percentage before they find support.
Diamond Offshore Drilling: Steady Execution And A Q3'14 Estimate
- Diamond Offshore recently provided an upbeat Fleet Status report. In one case this report reflected an increased day-rate.
- Diamond Offshore's dividend yield currently stands at 7.95%.
- Diamond Offshore maintains the highest credit rating among all offshore drillers.
- Diamond Offshore Drilling has beaten consensus analyst estimates 15 of the last 17 quarters.
Diamond Offshore Drilling: Fleet Analysis As Of July 24 And Second Quarter Results
- Diamond Offshore Drilling is a solid top-tier offshore driller with a good management team; however, the company presents some fleet weaknesses that need to be tackled soon to stay competitive.
- The surprising contract cancellation of the Ocean Vanguard by Statoil, has been a big drag for the Q2 revenue and will impact the next quarter as well.
- The jackup market and the floating market, especially, are becoming more challenging and Diamond Offshore will have to adapt to this new financial paradigm.
- Q214 earnings will be impacted by the Ocean Vanguard contract termination.
- The current quarter has been projected as weak for over a year.
- Diamond Offshore offers a yield of 7.41% at its current price.
Diamond Offshore Drilling: Uniquely Positioned To Capitalize On Industry Trends
- The Offshore Drilling Industry is set for a short-term period of revenue consolidation.
- Diamond Offshore Drilling has uniquely positioned itself to capitalize on the downtrend.
- DO's limited jack-up rig exposure will allow for it to outperform its peers.
Diamond Offshore Drilling: Thoughts On The May 2014 Rig Status Update
- I am Projecting an earnings beat of at least $.08 by Diamond Offshore in Q214, with increasing earnings in subsequent quarters.
- The operational objective is to keep older rigs working in this environment.
- Diamond Offshore management continues to execute efficiently.
- Diamond Offshore currently yields 7.02%.
Diamond Offshore Drilling: Fleet Analysis For A Well-Balanced Company
- Diamond Offshore delivered again a surprising quarter with higher day rates and stronger revenue than was expected.
- The analysis of the company's fleet is showing a notable aging in midwater and jackup rigs. This condition may become a clear disadvantage in this actual softening rate environment.
- The company offers a safe 6.7% in dividend and a strong balance sheet. Despite a recent spike in stock price, I see value long term.
Mon, Dec. 8, 7:20 PM
- With valuations at a decade low, oil execs such as Chesapeake Energy’s (NYSE:CHK) Archie Dunham and Ring Energy's (NYSEMKT:REI) Tim Rochford are driving the sector's biggest wave of insider buying since 2012, according to Bloomberg data.
- Rochford and two other board members bought a total of more than 30K REI shares over the past month; the CEO says the company can stay profitable even should oil slip to $50/bbl.
- “Most of these execs that are buying have been in the industry as long as I have, so they know how supply and demand works and they’re buying quality stocks,” says Dunham, who recently bought 500K CHK shares in his biggest purchase since joining the company’s board in 2012.
- Loews Corp. (NYSE:L), which owns about half of Diamond Offshore (NYSE:DO), bought 1.18M DO shares in November and bought another ~410K shares last week.
- Halcon Resources (NYSE:HK) and Goodrich Petroleum (NYSE:GDP) are among companies operating in the costliest U.S. shale-producing regions, but execs from those companies are buyers as well.
Mon, Dec. 8, 7:05 PM
- "Not much else bad can happen" to Seadrill (NYSE:SDRL), Credit Suisse analyst Gregory Lewis said this morning in maintaining his Neutral rating while edging his target price lower to $15 - 6x the firm's 2016 EBITDA estimate, a discount to the peer average but warranted given SDRL’s above average leverage (~56% and rising) and no dividend.
- However, a lawsuit was filed today in U.S. District Court citing "materially false or misleading statements with respect [SDRL’s] commitment and ability to continuing to pay a dividend to the exclusion of other opportunities and needs for the same capital.”
- Oilfield service companies and contractors, whose revenues depend on drilling activity, fell today in reaction to continually declining crude oil prices and ConocoPhillips' reduced capex guidance: SDRL -6.1%, SDLP -5.8%, NADL -17.9%, RIG -4.9%, RIGP -3%, ESV -7.2%, RDC -3.7%, PACD -6.8%, OIH -4.5%, but DO +1.3%.
Wed, Dec. 3, 2:53 PM
- Offshore drillers are rising modestly today after suffering a beating this year, but Jefferies cautions against seeing a buying opportunity in the beleaguered group.
- The firm says neither fundamentals nor valuation paint a compelling enough picture of the group; "more importantly, current softness masks the evolution of deepwater drilling to where specifications matter."
- Transocean (RIG +1.6%), which Jefferies says has the biggest contracting challenges both near-term and in the longer-run given a disproportionate mix of older UDW/UK floaters, is the least favorite name, while the firm sees relative value in Atwood Oceanics (ATW +0.7%) and Rowan (RDC +1.2%).
- Among other offshore drillers: DO +3.1%, PACD +3.1%, ESV +1%, NE -0.7%, SDRL -0.7%.
Mon, Dec. 1, 3:19 PM
- A bit late, Guggenheim analyst Darren Gacicia downgrades Seadrill (SDRL -5.5%), Transocean (RIG -4.5%) and Diamond Offshore (DO +3.3%) to Neutral from Buy, finally admitting that downward pressure on oil prices and a potential for capital markets to become shy to fund newbuild deliveries has undercut the tenets of his previous bull thesis.
- SDRL and RIG remain the most levered to deteriorating offshore market conditions, he says, believing SDRL shares may also suffer from an ownership transition from income to value investors and RIG perhaps sharing the same fate, with a 2015 dividend cut likely amid the potential for further asset writedowns.
- At DO, Gacicia sees risk of a dividend cut, rig retirements and deteriorating offshore market fundamentals as negative near-term catalysts; the firm also downgrades Seventy Seven Energy (SSE -16.2%), Cameron (CAM -2.8%), Frank's International (FI -0.1%) and FMC Tech (FTI -0.1%).
- In the space, the analyst prefers drillers with high-quality assets, solid contract coverage and a lack of funding needs, such as Noble Corp. (NE -0.2%) - which also has a buyback catalyst - Atwood Oceanics (ATW -0.1%) and Pacific Drilling (PACD -3.7%).
Thu, Nov. 27, 5:11 AM
- Oil/energy and consumer-goods underperformers lead the way.
- Total return takes into account all distributions.
- Table of S&P 500's biggest total-return losers YTD
Wed, Nov. 26, 12:49 PM
Wed, Nov. 26, 10:42 AM
- Seadrill (SDRL -19.2%) shares are plunging after the drilling contractor suspended dividend payments due to "significant deterioration" in the broader markets, and North Atlantic Drilling (NADL -13.8%) suspends its dividend because of the delay of its agreement with Rosneft as well as the weaker market.
- The move is slamming the entire sector, and Wells Fargo says that although SDRL is the first driller to cut its dividend, Diamond Offshore (DO -8.3%) and Transocean (RIG -4.7%) will "ultimately have to follow suit."
- Also: SDLP -6.6%, ESV -4.8%, ATW -4.3%, RDC -3.3%, NE -3.2%, PACD -6.5%, ORIG -2.7%, HP -1.1%, RIGP -2.5%.
- ETF: OIH
Mon, Nov. 17, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Thu, Nov. 13, 3:20 PM
- U.S. crude oil prices break below $75/bbl for the first time in more than three years, brushing aside an IEA report showing a surprise 1.735M barrel inventory drawdown as well as remarks by the Saudi oil minister dismissing talk of an oil price war among producers.
- West Texas crude settled today at $74.21/bbl, -3.9% and breaking below an important support level; during the past three years, futures have tested but not broken through that level three times.
- Brent crude recently was trading below $78, -3%.
- Global oil majors are all lower: COP -1.9%, BP -1.4%, CVX -1.4%, XOM -1.1%, TOT -0.9%, RDS.A -0.7%.
- Oil services companies and offshore drillers suffer even sharper drops: SDRL -4.4%, SLB -4.2%, HAL -3.9%, BHI -3.9%, RIG -3.8%, DO -3.5%, NBL -2.9%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, UGA, DTO, DBO, DUG, XES, IYE, IEO, CRUD, IXC, IEZ, PXE, USL, UWTI, IPW, FENY, PXJ, UHN, DWTI, DNO, RYE, FXN, SZO, GNAT, OLO, DDG, FILL, OLEM, TWTI
Wed, Nov. 5, 3:31 PM
- Rowan (RDC +4.4%) leads offshore drillers higher after easily beating Q3 earnings estimates and forecasting revenues to rise in 2015 despite its own predictions for a soft rig market next year; it certainly doesn't hurt that oil prices are higher today.
- FBR Capital says it likes RDC as both a near-term idea on a sentiment snap-back and as a longer-term investment opportunity for patient investors; the firm believes the risk in RDC is mitigated by the company's fully locked-up ultra-deepwater newbuild fleet, whose contract starts account for the entirety of net earnings growth it foresees from 2014 to 2016, as well as concentrated exposure to high-spec jackups, which make up 93% of 2015 jackup earnings and should see fundamentals hold up better than the other classes.
- Also: RIG +5.2%, SDRL +4.5%, ESV +3.6%, DO +5.7%, NE +5.4%, ATW +2%.
Tue, Nov. 4, 1:45 PM
- November is just two days old, but offshore drillers Transocean (RIG -4.7%), Seadrill (SDRL -7.2%), Diamond Offshore (DO -3.6%), Atwood Oceanics (ATW -2.6%) and Noble Corp. (NE -5.2%) are down more than 8% so far this month.
- The Zephirin Group thinks plunging oil prices are already beginning to impact demand for offshore drilling platforms, and the current dayrate range for ultra-deepwater drillships of mid $400-500/day is not helping the outlook.
- The latest piece of evidence of the weakness is ATW's six-month postponement of the delivery of two drillships under construction, which Zephirin expects will cost the company an additional $40M-$45M per rig.
- The firm also foresees a high possibility that the 2015-16 market and contract renewals rates could shift below expectations when energy companies start announcing 2015 capex budgets late this year.
Mon, Nov. 3, 2:58 PM
- Offshore drillers are broadly lower after Atwood Oceanics (ATW -5.2%) discloses in its latest fleet status report that it is delaying two deliveries in its fleet, and Diamond Offshore (DO -4.7%) is downgraded to Strong Sell from Sell at Nordea.
- The damage is minimal at Ensco (ESV -0.9%), however, as Johnson Rice analysts offer positive commentary on the "top-tier producer" after ESV's Q3 results displayed impressive operational execution while management made several positive moves during the quarter to improve the company’s financial flexibility.
- While management continues to expect further floater utilization and dayrate challenges through 2015, the jackup market was described as a potential near-term offset to floater headwinds as ESV cited record backlog within the jackup fleet and expected incremental Middle East jackup demand in H1 2015.
- Also: Caledonia deal not likely to held Transocean (RIG -2.8%) shareholders, analyst says.
- Also: RDC -2.8%, SDRL -3.1%, NE -1.1%, PACD -2.4%.
Mon, Oct. 27, 8:55 AM
- Goldman Sachs lowers its ratings on the oil services sector (NYSEARCA:OIH) to Cautious from Attractive and downgrades several specific stocks as it cuts its 2015 oil price forecast.
- U.S. land activity will suffer the biggest impact of the lower price deck, Goldman says, with customer capital spending expected to decline 6% next year vs. its prior outlook for a 9% increase; as a result, the firm now forecasts the horizontal U.S. rig count to fall 7%, or ~200 rigs, over the next 12 months.
- Goldman downgrades Parsley Energy (PE -3.8% premarket), Diamond Offshore (DO -1.5%), Laredo Petroleum (LPI -9%) and Basic Energy Services (BAS -6.2%) to Sell with sharply lower price targets; Patterson-UTI (NASDAQ:PTEN), Pioneer Energy (NYSE:PES) and Emerge Energy (NYSE:EMES) are cut to Neutral.
- The firm adds Oceaneering (OII -0.3%) to its Conviction Buy list; it also removes Halliburton (HAL -1.5%) from the list but maintains its Buy rating on the stock.
Thu, Oct. 23, 3:46 PM
- Diamond Offshore's (DO +5.5%) better than expected Q3 results is providing a lift across the offshore drilling sector today: RIG +3.8%, ESV +4.1%, RDC +2.6%, SDRL +1.9%, PKD +3.6%, HP +3.1%, ATW -0.5%.
- It was a trifecta of good news for DO: Its operating profit of $0.97/share easily topped Wall Street consensus for $0.79, it announced a special dividend of $0.75/share, and a positive fleet status update included two new rigs that had found work with Hess and Petrobras extending contracts on three rigs for three years.
- However, Cowen’s J.B. Lowe is cautious, noting that while that the $400K dayrates with Hess give DO a solid backlog though a soft time in the market, "they represent a new low in leading-edge newbuild ultra-deepwater floaters in this part of the cycle.”
Thu, Oct. 23, 6:41 AM| Comment!
Thu, Oct. 23, 6:14 AM
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