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, 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%.
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.
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. 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. 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. 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. 12, 2014, 3:23 PM
- It's another down day for offshore drillers after rig owner Noble Corp. (NE -4.5%) signs a pair of new contracts for work in the Gulf of Mexico at substantially reduced dayrates.
- NE's updated fleet status report highlighted a new contract for the Danny Adkins in the Gulf in a minimum 200-day program at $317K/day vs, its previous rate of $498K/day and analyst expectations for the high $300K; the less than rosy update prompts Johnson RIce to lower its 2014 and 2015 EPS estimates to $3.06 and $2.98 from $3.16 and $3.27 previously.
- Seadrill (SDRL -5.4%) also is getting smacked after offering up its own pessimistic take on the offshore drilling industry, and its deal with Rosneft could be threatened by the latest sanctions imposed on Russia by the U.S. and EU.
- Also: RIG -3.6%, ESV -3.6%, DO -3.7%, RDC -1.4%, PACD -2.9%, SDLP -4.1%.
Apr. 7, 2014, 3:33 PM
- Things could get worse before they get better for offshore drillers, and even market favorite Rowan (RDC -3.6%) could get hit, Morgan Stanley says as it cuts its rating on the stock to Underweight.
- RDC has fallen less than companies with exposure to the floater market thanks to its greater exposure to jackups, but Stanley sees a surge in jackup orders, driven largely by speculative drillers at Chinese shipyards; the jackup orderbook now stands at a record 140 units, of which only ~20 have been contracted.
- In the sector, the firm recommends yield plays such as Seadrill (SDRL), Seadrill Partners (SDLP) and North Atlantic Drilling (NADL), and prefers premium asset exposure through Atwood Oceanics (ATW), Ensco (ESV) and Pacific Drilling (PACD) over lower-end fleets via Diamond Offshore (DO), Noble (NE) and Transocean (RIG).
Feb. 3, 2014, 3:39 PM
- Raymond James maintains its bearish stance on offshore drillers and cuts its estimated 2015 sector EPS by ~18% while noting that this a typical cyclical slowdown and not permanent.
- The firm estimates the industry needs to cold stack ~6% of both the floater and jackup fleet over the next three years to maintain 90% utilization; assuming the pace of newbuilds slows, this should improve the supply/demand dynamics by 2017.
- Rowan Cos. (RDC +0.2%) earns an upgrade to Outperform, joining Pacific Drilling (PACD -1.9%) and Ocean Rig UDW (ORIG -2.1%) as drillers who would rank atop the list of any would-be acquirer given the high spec nature of the fleets.
- Atwood Oceanics (ATW -4.1%), Ensco (ESV -2.4%) and Noble Corp. (NE -0.3%) are downgraded to Market Perform, as offshore stocks are in “full-blown meltdown mode."
- The firm maintains Transocean (RIG -1.9%), Diamond Offshore (DO -1.6%) and Hercules Offshore (HERO +0.4%) at Market Perform, noting that “lower quality assets are too risky as we head into a sloppy market."
Sep. 3, 2013, 2:59 PM
- Ensco (ESV -2.1%) is downgraded to Equal Weight from Overweight with a $60 price target (from $82) at Barclays, which sees continued high levels of unplanned downtime prompting concerns with ESV's operational execution, despite its high-quality mixed fleet of relatively standardized assets.
- The firm prefers ultra-deepwater pure-plays, including Ocean Rig (ORIG +2.1%) and Pacific Drilling (PACD +2.6%), and catalyst-rich offshore drillers led by Noble Corp. (NE -0.4%), which is undergoing operational improvements and is moving forward with a meaningful non-core asset divestiture.
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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