Seeking Alpha

Transocean Ltd. (RIG)

  • Thu, Apr. 23, 3:59 PM
    • Transocean (RIG +0.6%) is downgraded to Underweight from Equal Weight at Morgan Stanley, which cites RIG's "increasingly marginalized fleet."
    • The firm believes current rig market conditions could motivate RIG to cold-stack up to 17 other lower-end floaters - a third of its marketed floater fleet of 55 units - and that "deteriorating customer behavior" regarding contracts could affect RIG, especially in Brazil.
    • RIG also is most levered to the 5G market, Stanley says; despite the firm's assumption that its 15 x 5G floaters remain marketable, "it is evident this rig class is increasingly misplaced as prototype ultra-deepwater rigs with lower efficiency than 6G+ peers, as demonstrated by [RIG's] recent decision to scrap the 1999-built Deepwater Expedition.
  • Wed, Apr. 22, 11:58 AM
    • Transocean (RIG -0.1%) shares are not getting a boost from the appointment of National Oilwell Varco CFO Jeremy Thigpen as the new CEO, even though most analysts say the move will help the company successfully implement and carry out its strategies to manage the market downturn.
    • The move reunites Thigpen with Pete Miller, the former NOV CEO who will soon become RIG's chairman; Miller likely was instrumental in bringing Thigpen over to RIG, given their close working relationship at NOV, and the relationship should help ensure a smooth transition.
    • Analysts remain cautious on RIG given the challenges it will face over the next two years; RIG already has announced its intention to scrap 19 of its lower-spec floaters, has stacked or idled an additional 11 units YTD, and has 31 floaters rolling off contract before the end of 2016.
  • Tue, Apr. 21, 6:57 PM
    • Transocean (NYSE:RIG) names Jeremy Thigpen as its new President and CEO effective immediately, succeeding interim CEO Ian Strachan.
    • Prior to joining RIG, Thigpen spent his career in various roles at National Oilwell Varco (NYSE:NOV) and became senior VP and CFO in 2012; he joined NOV in 1997.
    • Strachan - also RIG's Chairman - will retire from the board at the end of his term at the 2015 annual general meeting following 16 years at the company.
    • RIG -0.7% AH.
  • Tue, Apr. 21, 11:48 AM
    • Raymond James doubles down on its negative outlook for offshore drilling contractors, as the firm cites the lack of new contracts and the need for a much more significant move in oil prices to materially change the sector's landscape.
    • The firm says the current contracting rate trends well below its expected pace and even below 2009 levels as the desire to pursue further activity skids to a halt, and believes that 2016 consensus estimates have substantial room for downward earnings revisions; including contract cancellations, the sector actually experienced negative incremental demand during the Q1.
    • Raymond James sees the average offshore rig count declining by 13% in 2016 and a further 4% in 2017; even with cost-cutting efforts, it expects the average uncontracted rig to lose money as leading edge dayrates will flirt with risked breakeven levels with only minimal recovery in the next two years given the levels of excess supply.
    • Offshore drillers are lower today: ORIG -5.8%, RIG -4.5%, SDRL -4.1%, NE -2.8%, ESV -2.8%, DO -2.1%, ATW -2.1%, PACD -2%, RDC -1.9%.
  • Fri, Apr. 17, 11:46 AM
    • Transocean's (RIG -2.3%) rigs are "dropping like flies," Credit Suisse says as it reiterates its Underperform rating and $12 stock price target after RIG's latest fleet status report revealed it had a contract terminated early and had decided to scrap yet another rig.
    • RIG's scrapping of the GSF Explorer, which last worked in November 2014 at $412K/day, boosts the number of floaters the company intends to scrap to 19, up from 11 at the end of 2014; early termination of the Sedco Energy raises RIG’s idle floater count to six.
    • RIG expects scrapping the GSF Explorer will result in a Q2 non-cash charge of $100M-$120M.
    • Offshore drilling contractors are broadly lower, particularly Atwood Oceanics (ATW -4.1%) after Chevron shortened its contract term for one of its drilling units; also DO -2.2%, PACD -2.1%, NE -1.5%, ESV -0.6%, RDC -0.2%, SDRL +0.3%.
  • Thu, Apr. 16, 10:58 AM
    • Ensco (ESV -4.8%) reveals in its April fleet status report that it agreed to lower dayrates on seven of its jackups working for Saudi Aramco in the Middle East, with reductions ranging 10%-20% and an average decline of 15% across the seven rigs.
    • Cowen analysts believe further rate negotiations are ongoing and could affect other operators with units contracted to Saudi Aramco, noting that Rowan (RDC -4.2%) may be the most exposed since it has nine rigs currently working with Aramco; RDC secured three-year contract extensions in Sept. 2014 on four of the jackups, which could see reductions, as well as four units currently under negotiation extensions.
    • Other contractors with units working for Aramco are Noble Corp. (NE -4.9%) with four units, Hercules Offshore (HERO -3.9%) with two (after the termination of the Hercules 261), and Seadrill (SDRL -3.9%) with three.
    • Other offshore drilling contractors also are lower: RIG -3%, ATW -2.3%, DO -4.1%, HP -2.7%, ORIG -2.5%, PACD -4.2%.
  • Thu, Apr. 2, 12:36 PM
    • Transocean's (RIG +1.3%) plans to scrap two more offshore rigs are just the latest of 32 floating rigs that have been designated for retirement over the past six months, and Cowen analysts foresee at least 100 units removed from supply over the next two years before the market is balanced.
    • Cowen also expects a majority of currently uncontracted newbuilds will have their deliveries pushed out beyond 2016, as the rig owners wait for demand to perk back up in 2017 and beyond; highlighting this trend was Atwood Oceanics' (ATW +0.8%) news that it may delay deliveries of its last two uncontracted newbuilds by up to a year, in addition to the six month delay already in effect.
    • Though still cautious on the offshore drilling sector, Cowen prefers Noble Corp. (NE +1.3%) and ATW on a relative basis, citing high quality fleets, superior contract coverage through 2016 and strong free cash flow generation; the firm avoids RIG and Diamond Offshore (DO +0.2%) as their fleets will be the most challenged to secure work in the current market environment.
  • Wed, Apr. 1, 5:30 PM
    • Transocean (NYSE:RIG) discloses that it intends to dispose of two rigs that currently are classified as held for sale, and expects to record a related charge of $90M-$110M in Q1.
    • The latest cut to RIG's fleet brings the number of rigs the company plans to scrap to 18; RIG said last month it would scrap four other rigs.
    • RIG says it will continue to evaluate the long-term competitiveness of its fleet and that additional rigs may be identified as candidates for disposal.
  • Mon, Mar. 30, 11:19 AM
    • Transocean (RIG -0.9%) is upgraded to Neutral from from Reduce with a $14 price target at Global Hunter, which says its analyst team traveled last week with company execs and now believes RIG has the ability to significantly reduce risk exposure and manage cash flows even through a potentially prolonged downturn.
    • The firm sees RIG as poised to emerge from the current market stagnation with a smaller fleet, but one that is also more concentrated in the relatively scarce asset classes.
    • Global Hunter believes the upcoming CEO announcement could provide an opportunity for RIG to take financing steps to fortify its liquidity and lower ongoing risk.
  • Thu, Mar. 19, 3:49 PM
    • Diamond Offshore (DO -3.5%) adds another rig to its stacked fleet with the addition of the Ocean Yorktown, the eighth floater the company has retired or cold stacked since the market started to rollover in H2 2013.
    • DO says it is still in discussions with Pemex, Petrobras and Dana on existing contracts for six rigs where customers have provided verbal notification of cancellation.
    • DO's fleet update comes as industry leader Transocean (RIG -7%) aggressively moved to scrap four additional floaters and stack four floaters that had been idle.
  • 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. 19, 3:29 AM
    • Transocean (NYSE:RIG) expects to book an after-tax charge of between $300M-$325M as it moves to dispose of four rigs.
    • According to Baker Hughes, U.S. oil-rig count fell to 866 last week, the 14th straight week of declines, as plunging oil prices wreak havoc on the industry.
    • Transocean also logged a $992M charge to correct the value of its contract drilling business in February, and saw the departure of CEO Steven Newman.
    • Previously: Rig idling near 20-year high, offshore drillers say (Feb. 26 2015)
  • 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.
  • 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.
  • 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%.
Visit Seeking Alpha's
RIG vs. ETF Alternatives
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.