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Transocean Ltd. (RIG)

  • Today, 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.
  • Fri, Feb. 27, 12:45 PM
    • Hercules Offshore (HERO -28.2%) shares are crushed after this morning's downgrade to zero by Deutsche Bank analyst Mike Urban, who had maintained a Buy rating on the oil drilling services company for more than two years.
    • Urban says he had remained positive on HERO relative to his negative view on the offshore driller sector because he did not foresee a lot of new competition to enter the shallow Gulf of Mexico area where the company had a commanding market position; that dominant position is no longer enough, he says, because "the collapse in oil prices has eviscerated demand.”
    • Other stocks in the sector are rising today: RDC +3.6%, ATW +2.5%, RIG +2.4%, DO +2%, PKD +1.6%, HP +1.3%, ESV +1%.
  • Thu, Feb. 26, 3:57 PM
    • Ensco (ESV -8.2%) has suffered a steady retreat throughout the session even though its Q4 earnings beat analyst estimates; ESV is badly lagging peers Seadrill (SDRL -2.4%) and Transocean (RIG -1.9%), who also released earnings during the past 24 hours.
    • The difference appears to be ESV's unexpected decision to cut its dividend by a whopping 80% to $0.60 from $3, which equates to a 9% payout of 2015 operating cash flow; ESV is now yielding 2.3%.
    • Credit Suisse says that while it was concerned about the dividend's long-term sustainability, it had thought a lower dividend would be an H2 2015 or H1 2016 event, also noting workforce cuts is "not the sign of a V shaped recovery."
    • ESV reports Q4 utilization fell to 86% from 90% in the year-ago quarter, due mostly to increases in uncontracted rig days.
    • CEO Carl Trowell said in today's earnings call that the company will shut down or cold stack a rig by mid 2015, costing ~$12M over the first two quarters, and could stack an additional rig if oil prices do not improve.
  • 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%.
  • Thu, Feb. 26, 12:49 PM
    • Transocean (RIG +1.3%) is ~1% higher after reporting better than expected Q4 earnings and favorable cost guidance.
    • RIG's Q4 fleet revenue efficiency was 95.3%, up from 92.6% in Q3, and revenue efficiency on ultra-deepwater rigs was 95.4%, up from 91.6% in the prior quarter.
    • RIG took a $992M impairment charge due to the decline in the market valuation of its contract drilling services business; as a result, the company says it has no goodwill remaining on its balance sheet.
    • Q4 cash flows from operating activities were $566M, down from $882M in Q3.
    • Says it has amended its construction contracts to delay the delivery of five newbuild high specification jackups by roughly six months, and will continue to dispose of non-core rigs; says it disagrees with Moody's downgrade.
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  • Thu, Feb. 26, 6:17 AM
    • Recovering from earlier losses, Transocean (NYSE:RIG) is now up 8.4% premarket as investors turn to the offshore oil driller's smashed consensus revenue and EPS estimates.
    • Despite a $992M impairment charge that did away with the remaining goodwill on the company's balance sheet, adjusted profit came in at $0.95 a share, up from $0.71 a share a year earlier.
    • Options traders were betting on a big one-day, post-results move of about 7.5% in either direction, according to FactSet.
    • Previously: Impairment charge hits Transocean's results (Feb. 26 2015)
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  • Thu, Feb. 26, 2:33 AM
    • Transocean (NYSE:RIG) -1.3% premarket after the offshore oil driller reported a heavy net loss on a $992M impairment charge that corrected the value of its contract drilling business.
    • Fourth quarter net loss came in at $739M, compared with a net profit of $233M, a year earlier.
    • The company has also faced a recent CEO change and downgrade from Moody's, which lowered its debt to junk status yesterday.
  • Wed, Feb. 25, 10:58 PM
    • Transocean (NYSE:RIG): Q4 EPS of $0.95 beats by $0.18.
    • Revenue of $2.24B (-1.3% Y/Y) beats by $140M.
    • Press release
  • Wed, Feb. 25, 3:43 PM
    • More than half of Transocean's (RIG +0.7%) ultra-deepwater rigs could be out of work by the end of 2015, UBS analysts say, now expecting RIG to earn $0.69/share in 2015, down from their earlier forecast of $1.36, and lose $0.75/share in 2016, down from a profit of $0.41.
    • Idle UDW rigs are expensive given that they are cannot be easily stacked and fixed costs remain, UBS says, calculating that eight idle floaters would cost RIG $728M/year ($250K/day in operating costs), and would still cost $320M ($110K/day) even if cold stacked.
    • Separately,  Moody's downgrades RIG's rating to Ba1, reflect RIG's large capital commitments and the rating firm's expectation for a significant increase in leverage as the company enters what could be a prolonged industry down-cycle.
  • Wed, Feb. 25, 2:15 PM
    • Options traders are foreshadowing a big one-day move in Transcean’s (RIG +0.7%) stock, after the company reports Q4 earnings after today’s close.
    • Straddle options expiring Friday imply a one-day, post-results move of ~7.5% in either direction, compared with an average move of 2.3% the day after the last 12 quarterly reports; the last time the stock moved at least 7.5% the day after an earnings report was in November 2011 when it slid 12.5%.
    • Investors may be leaning toward disappointing results today, as short interest as of Jan. 30 was at its all-time high of 113.2M shares, nearly 9x the average daily volume in the stock.
  • Tue, Feb. 24, 5:35 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%.
  • Tue, Feb. 24, 10:59 AM
    • Transocean (RIG -1.6%) is poised to be the first in a wave of energy-related debt issuers downgraded to junk status, according to a Barclays report that says RIG could be stripped of its investment-grade ratings soon after it reports earnings tomorrow.
    • The cost of credit swaps used to protect RIG debt against default within five years has soared to 714 bps, a level associated with junk-rated companies, from less than 200 in September, Bloomberg says.
    • Weatherford (NYSE:WFT), Nabors Industries (NYSE:NBR) and Canadian Oil Sands (OTCQX:COSWF) are among the other investment-grade energy companies at risk of a downgrade to junk by mid-2016, according to Barclays.
    • As much as $20B of energy-related debt may be cut to junk within 18 months, expanding what is already the largest part of the high-yield, high-risk market by 11%, the report says.
  • 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%.
  • Wed, Feb. 18, 12:36 PM
    • Analysts say Transocean's (RIG -5.6%) latest fleet status report, which showed another two rigs now idle, is a reminder that the offshore driller continues to face tough times.
    • RIG still has nine idle rigs globally, and Credit Suisse says its channel checks indicate it is preparing to stack the Sedco 707 - the rig is en route to Asia and expected to arrive in March - and the GSF Arctic III looks to be headed to Scotland for stacking.
    • RBC analysts believe RIG faces a “double-edged sword" of lost revenue on idle rigs and paying operating costs to keep the rigs ready, with the company still needing additional funding despite its dividend cut.
  • Tue, Feb. 17, 11:46 AM
    • Transocean (RIG -0.6%) is down only modestly after yesterday's news of CEO steve Newman's surprise resignation and the 80% dividend reduction.
    • Analysts are mostly negative, believing Newman's departure signals more challenging times ahead for RIG after already impairing $2.8B of assets last quarter with more impairments expected in 2015; with an aging floater fleet and an increasing oversupply of rigs available for work globally, RIG likely will need to stack and retire a large number of its assets.
    • Deutsche Bank reiterates a Sell rating for RIG and cuts its price target to $6 from $16, saying the dividend reduction frees up ~$800M/year and was a better outcome than an outright elimination, but the firm expects RIG's free cash flow to remain negative for the "foreseeable future."
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Company Description
Transocean Ltd is an international provider of offshore contract drilling services for oil and gas wells. The Company has two operating segments; contract drilling services and drilling management services.