Thu, Mar. 19, 5:37 PM
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.
Wed, Mar. 11, 3:48 PM
- Paragon Offshore (NYSE:PGN) and Diamond Offshore (NYSE:DO) are at risk from Pemex contract cancellations but Seadrill (NYSE:SDRL) is probably safe, according to analyst Lenny Zephirin.
- The analyst says Pemex is committed to reduce the age of its jack-up fleet by replacing old equipment; with this in mind, PGN and DO - each with two rigs up for contract renewal, averaging a respective 38.2 and 40 years in age - appear especially vulnerable for rigs be terminated or renewed at lower dayrates.
- However, SDRL looks safe in Mexico, currently averaging five years for 5 jack-ups and four years for one semis, Zephirin says.
- The analyst also sees Saudi Aramco continuing to cause problems for drillers, particularly Rowan (NYSE:RDC), whose exposure to Saudi Aramco is 34.4% of its ~$5.1B backlog, and a potential discount could negatively impact RDC’s gross EPS by $0.45-$0.55/year; EPS could be impacted at Ensco (NYSE:ESV) by $0.35-$0.45, Hercules Offshore (NASDAQ:HERO) by $0.10-$0.20, Noble Corp. (NYSE:NE) by $0.12-$0.24 and SDRL by $0.05-$0.10.
Thu, Mar. 5, 11:59 AM
- Expect tough times to continue in the offshore drilling sector, RBC analyst Robert Pinkard says but adds that M&A activity in such a fragmented market could make him more positive.
- Pinkard expects any deals to be almost entirely with equity given already stretched balance sheets, and he doubts premiums paid would be big enough to re-rate the entire group; he views Rowan (RDC -1.6%) as the most attractive M&A target due to the combination of a strong balance sheet and quality of rigs, with Diamond Offshore (DO +1%), Ensco (ESV -0.4%) and Noble Energy (NE -1.8%) as the most likely potential acquirers.
- Otherwise, the analyst prefers “companies with better contract coverage/visibility" such as ESV, NE and RDC to those with more exposure, such as DO and Transocean (RIG -0.7%).
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.
Mon, Mar. 2, 5:37 PM
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%.
Fri, Feb. 6, 12:57 PM
- Offshore drillers haven't gained much analyst respect lately (I, II, III, IV), but new reports on Noble Corp. (NE +4.4%) and Pacific Drilling (PACD +0.2%)paint an unusually optimistic picture.
- Susquehanna remains Positive-rated on NE as a preferred name among offshore drillers, raising its 2015-16 EPS estimates to a respective $2.44 and $1.59 from $2.04 and $1.42 while cutting its forecast for contract drilling expenses to account for the retirement of three semi-submersible rigs and an expected reduction in per-rig operating costs in 2015.
- Zephirin Group is optimistic about PACD’s prospects, despite the fact that it pulled a rig out of Brazil amid the shakeup at Petrobras; it maintains its Buy rating, citing the tender of the UDW Pacific Meltem to Chevron for work in the Gulf of Mexico.
Wed, Feb. 4, 6:41 PM
- Noble Corp. (NYSE:NE) -3% AH after Q4 earnings fall short of expectations and says it will defer indefinitely plans to launch an MLP, citing diminished appeal due to the decline in offshore market fundamentals.
- NE says its total contract backlog at year-end 2014 was ~$10.1B vs. $10.6B at the end of Q3, with depletion partially offset by new contracts that added $342M mostly from three-year contract extensions on two Middle East-based jackups at dayrates of $143K each.
- Says it will no longer market the semi-submersibles Noble Paul Wolff, Noble Driller and Noble Jim Thompson, and plans to retire the units.
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.
Wed, Feb. 4, 5:25 PM
Tue, Feb. 3, 5:35 PM
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Tue, Feb. 3, 12:57 PM
- Zephirin Group’s Lenny Zephirin upgrades Seadrill (SDRL +9.3%), Noble Corp. (NE +4.4%) and nearly every other offshore driller in the firm's coverage, citing a significant change in market sentiment as mounting doubt of a recovery of oil prices that had held down share prices of offshore drillers reverses.
- SDRL and Hercules Offshore (HERO +13.1%) are raised to Buy Speculative Risk from Sell, Ocean Rig (ORIG +10.4%) is lifted to Buy High Risk from Sell, NE and Diamond Offshore (DO +0.4%) is upgraded to Hold Speculative Risk from Sell, Ensco (ESV +2.4%) is lifted to Hold High Risk and Vantage Drilling (VTG +8.8%) to Hold Speculative Risk; the already had Buy rating for Transocean (RIG +5.9%) and Rowan (RDC +3.2%).
- Energy stocks are higher across the board as crude oil trades up 4.2% at $51.66/bbl and sits nearly $9/bbl above its January low.
Wed, Jan. 21, 5:35 PM
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