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%.
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.
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%.
Wed, Feb. 25, 10:19 AM
- Petrobras (PBR -8.3%) plunges in early trading after Moody's downgraded the heavily indebted company's long-term debt to a junk Ba2 rating from Baa3 with a negative outlook.
- Brazil's finance minister reportedly made a last-minute attempt to the rating agency to try to reverse the decision, offering a guarantee that the government would support the company if necessary.
- "The main concern now will be another cut to junk by Fitch or S&P, which could lead the company’s bonds to be sold by many institutional investors," says the head of fixed income at Andbanc Brokerage.
- Separately, PBR reportedly will not renew leases on at least four drilling rigs from Seadrill (SDRL +0.2%), Pacific Drilling (PACD -2.2%) and Diamond Offshore (DO -1.6%) that have been under negotiation since last year; DO already had disclosed the cancellation in its latest 10-K, and SDRL recently warned that contract extensions with PBR likely would fail.
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, 5:58 AM
Sun, Feb. 22, 5:30 PM
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, 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, 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.
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%).
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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