Dec. 19, 2014, 5:25 PM
- Transocean (NYSE:RIG) shares finished sharply higher today (+7.9%), but it’s hard to ignore the largely negative December fleet status report that came out late yesterday.
- In lowering his stock price target to $17 from $20, Cowen analyst J.B. Lowe said RIG secured one attractive contract this month, not enough to fill much needed ultra-deepwater floater availability; while RIG was able to put two idle floaters back to work, it had four additional rigs go idle, including one where the customer canceled the contract.
- Lowe believes falling oil prices will put increased strain on dayrates and utilization during 2015.
- Most offshore drilling service contractors racked up strong gains today as crude oil prices rebounded: NE +9.5%, ESV +9.5%, RDC +5.9%, DO +0.5%, ATW +7.1%, PACD +14%.
Dec. 19, 2014, 11:44 AM
- Transocean (RIG +4.6%) discloses that it plans to scrap seven of its older, lower-quality deepwater and midwater vessels, and adds that it may not be finished getting rid of parts of its fleet, even as oil prices and demand for offshore rigs have fallen.
- RIG says it expects to take a related $100M-$140M charge in Q4.
- RIG's decision to put the rigs up for sale comes after a string of vessel retirements and a $2.76B writedown of the company’s asset value in November.
- Most offshore drilling service contractors are higher: ESV +5.1%, RDC +1.7%, DO +0.8%, ATW +3.1%, PACD +8.4%, but SDRL -4.3%.
Dec. 8, 2014, 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%.
Dec. 3, 2014, 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%.
Dec. 1, 2014, 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%).
Nov. 28, 2014, 9:45 AM
- The sector was wrecked on Wednesday as Seadrill suspended its dividend amid "significant deterioration" in the oil market, and its North Atlantic Drilling suspended its payout because of the same combined with the delay in its Rosneft deal.
- The market "deteriorates" even further today with OPEC's decision yesterday not to cut production. WTI crude is "off the lows" as they say, but still down 5.8% at $69.43 per barrel.
- Seadrill (SDLP), North Atlantic Drilling (NADL -8.3%), ENSCO (ESV -8.8%), Atwood (ATW -7.7%), Rowan (RDC -7.2%), Pacific Drilling (PACD -4.5%).
Nov. 26, 2014, 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
Nov. 17, 2014, 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.
Nov. 5, 2014, 12:03 AM
Nov. 3, 2014, 5:35 PM
- ADEP, AMRS, ATVI, AWAY, AXLL, BIO, BIOL, BIRT, CALD, CBSO, CDXS, CERS, CHUY, CKEC, COHR, CORT, COUP, CRTO, CSU, DOX, DVN, ENPH, EXAM, EXEL, FANG, FEYE, FOXA, FRGI, GAS, GHDX, HR, ITRI, IVR, JAZZ, JIVE, JKHY, JMBA, KAR, MITT, MOSY, MPO, MYGN, NP, NRP, NSTG, NYMT, OAS, OCLR, OKE, OKS, PACD, PAYC, PBPB, PCYC, PEGA, PHH, PRI, PXD, PZZA, REGI, REXX, RLOC, RNR, RP, SBAC, SN, SPA, SQNM, TMH, TNET, TRIP, TTGT, TWO, TWOU, TX, UIL, WPX, XEC, XNPT, ZAGG, ZU
Nov. 3, 2014, 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%.
Oct. 20, 2014, 6:14 PM
- Seadrill (NYSE:SDRL) was downgraded to Neutral/High Risk from Buy today at Citigroup, which cited a combination of disappointing exploration, further investment decision delays and increased oil price uncertainty as leading to a 10% reduction in its medium-term rig demand forecast.
- Citi believes the decline, combined with significant supply added in 2015, likely will extend the current market weakness into 2016, which could materially affect SDRL’s ability to sign and thus finance the next wave of its newbuilds; it also sees increased risk of dividend cuts to maintain the leverage ratio within covenants.
- SDRL finished flat today but most offshore drillers rose even as the firm lowered its growth estimates across the sector to reflect a slowdown in investment: ATW +3.4%, HP +3.3%, RDC +3.2%, DO +2%, RIG +1.8%, NE +1.7%, PACD +1.2%, ESV +1%.
Oct. 17, 2014, 5:18 PM
- A fifth Chevron (NYSE:CVX) drillship has arrived in the deepwater Gulf of Mexico, as newbuild ultra-deepwater drillship Pacific Sharav will start work for CVX under a contract with Pacific Drilling (NYSE:PACD).
- The vessel, working under a five-year charter at a dayrate of $555K, is the fifth drillship contracted by CVX for deepwater operations in the Gulf, where it aims to bring on stream the Jack-St Malo project later this year.
- Meanwhile, PACD is said to be touting sister drillship Pacific Meltem in a Petrobras (NYSE:PBR) tender for drilling work in the giant Libra pre-salt area off Brazil but has yet to line up a contract for a further newbuild drillship under construction.
Oct. 6, 2014, 3:42 PM
- If offshore drillers didn’t have enough to worry about, they now have to be concerned with new rigs coming onto the market, Credit Suisse analysts say.
- "2015 looks tough, real tough" for offshore drillers, the firm says, pointing to the newbuild drillship Maersk Venturer, which "has finally left the shipyard without a contract, well sort of... Expectations are that the rig will end up with Total in southeast Asia for some short-term work... While this was the first newbuild drillship to leave a shipyard without its’ maiden contract inked it will not be the last! We expect 1H15 to see peak floater deliveries."
- The companies are trading mixed today: RIG +2.8%, SDRL +2.2%, DO +2%, RDC +1.1%, ATW +0.9%, ESV +0.9%, PACD +0.7%.
Sep. 24, 2014, 12:27 PM
- Offshore drillers continue their dramatic recent slide, as rigs go idle and analysts cut their ratings, and Wells Fargo piles on with a new report explaining why it’s still too early to buy into the group.
- The firm sees offshore spending facing a structural slowdown, the offshore rig count set for anemic growth through 2015, further downside risk In offshore rig utilization and dayrates, and OSV utilization and rates likely to face downward pressure.
- Wells initiates coverage on Transocean (RIG -2.9%), Seadrill (SDRL -1.9%) and Diamond Offshore (DO -2.5%) at Underperform, while Noble Corp. (NE -2.5%), Rowan (RDC -0.5%), Ensco (ESV -1.9%), Atwood Oceanics (ATW -1%) and Pacific Drilling (PACD -3%) are started at Market Perform.
Sep. 23, 2014, 3:16 PM
- In its latest fleet status update, Transocean (RIG -0.4%) said it had idled one of its rigs, and Credit Suisse analyst Gregory Lewis says there's more of the same ahead for the offshore drilling services provider.
- The idling of the Jack Ryan puts RIGs ultra-deepwater idle fleet count at three rigs, and RIG has another six UDW rigs rolling off contract by year end; the analyst warns of more rigs to idle later this year.
- The news wasn’t all bad, however, as some new contracts were at or above expectations, according to RBC.
- Offshore drillers are mixed today after recent sharp declines: DO +1%, ATW +0.6%, SDRL -0.9%, RDC -0.9%, ESV -0.6%, PACD -0.2%.
PACD vs. ETF Alternatives
Pacific Drilling SA is an international offshore drilling contractor committed to becoming the preferred provider of ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification rigs.
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