Tue, Jan. 6, 2:53 PM
- Moody's says it is placing Transocean's (RIG -1.9%) Baa3 rating on review for downgrade to reflect the company's large capital commitments and the rating agency's expectation for a significant increase in leverage at the start of an apparently long industry down-cycle.
- Moody's sees the increased likelihood of deteriorating financial metrics more than offsetting the reduced risk of additional Macondo payouts and the possibility of large distributions to stockholders; also, the potential for debt-financed drop-downs of some of RIG's best assets to Transocean Partners (NYSE:RIGP) could result in structural subordination issues for creditors at the parent level.
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Thu, Jan. 1, 2:19 AM
- Dow: INTC +41%; UNH +35%; HD +28%; CSCO +25%; MSFT +25%.
- S&P 500: LUV +125%; EA +106%; EW +95%; AGN +92%; AVGO +91%.
- Nasdaq: AAL +112%; EA +106%; AVGO +91%; GMCR +78%; ILMN +68%.
Dec. 23, 2014, 5:42 PM
- Three of the five worst performers in the S&P 500 this year are offshore rig contractors Transocean (NYSE:RIG), Noble Corp. (NYSE:NE) and Ensco (NYSE:ESV) - plus non-S&P company Hercules Offshore (NASDAQ:HERO), the largest provider of shallow-water rigs in the Gulf of Mexico, has plunged 84% YTD - and analysts say next year may be worse with “grievous” cuts coming for exploration plans.
- Earnings for the world’s five biggest offshore rig contractors are expected to fall an average of 18%, and only Seadrill (NYSE:SDRL) is seen increasing profit in 2015, since 75% of its rigs are backed by contracts next year, highest among the five.
- To preserve cash, rig owners already have begun scrapping older rigs to balance supply and demand; Bloomberg says ~140 older rigs would need to be culled to make way for new vessels scheduled for delivery by 2020, double the number scrapped in the previous six years.
- If the industry is to return to a healthy state, older rigs will have to be scrapped, not spun off into separate companies as has been the case, SDRL CEO Per Wullf says.
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. 19, 2014, 10:37 AM
- Even some of Wall Street's big boys are taking a beating in the oil sector: Carl Icahn’s holdings of Talisman Energy (NYSE:TLM) have tumbled $230M since late August, and John Paulson’s firm had one of its largest losses of the year on a bet that big oil companies would buy smaller ones.
- Before TLM agreed to be bought by Repsol, which boosted TLM shares, Icahn's losses stood at more than $540M as recently as Dec. 11, and he still will have lost ~$290M at the deal price; Icahn also holds stakes in hard-hit Chesapeake Energy (NYSE:CHK) and Transocean (NYSE:RIG).
- Paulson was the biggest shareholder in Whiting Petroleum (NYSE:WLL) and Oasis Petroleum (NYSE:OAS) at the end of Q3, but his strategy could yet pay off, as many analysts expect consolidation in the energy sector as lower oil prices pressure smaller firms.
- Also caught flat-footed by the oil price pullback was Prosperity Capital’s Mattias Westman, a longtime investor in Russia whose firm has lost more than $1B this year, in part on stakes in Russian energy companies Gazprom (OTCPK:OGZPY) and Lukoil (OTCPK:LUKOY, OTC:LUKOF).
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. 2, 2014, 2:48 PM
- Energy stocks (XLE +1.4%) are posting the day's largest gains among S&P sectors, rebounding from recent losses even as Nymex crude oil fell another $2.05 to $66.97/bbl.
- Refiners Marathon Petroleum (MPC +4%) and Valero (VLO +4.1%) and pipeline operator Williams Cos. (WMB +1.5%) are among the top gainers, while losers include most oil services companies such as Halliburton (HAL -2.2%) and rig operator Transocean (RIG -3.7%).
- Anadarko Petroleum (APC +1.6%), Cimarex Energy (XEC +1%), Devon Energy (DVN +0.7%), EOG Resources (EOG +3.8%) and Marathon Oil (MRO +3.5%) were selected top “safe haven” picks for analysts at Tudor Pickering Holt, which said they are “liquid names with high-quality assets and healthy balance sheets."
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%).
Dec. 1, 2014, 12:21 PM
- Oil prices are rebounding, with both WTI and Brent crude up ~2%, but only a handful of energy stocks are rising.
- Exxon Mobil (XOM +1.4%) and Chevron (CVX +1.3%) are both up more than 1%, but the vast majority of energy stocks - led by Denbury Resources (DNR -8.9%), Newfield Exploration (NFX -7.6%) and Goodrich Petroleum (GDP -22.3%) - are seeing heavy selling.
- The SPDR Energy Select Sector ETF (XLE -1.2%) is lower despite gains in XOM and CVX, XLE’s two most heavily weighted stocks, as 38 of its 43 equity components trade lower; the ETF has now lost 7.5% since OPEC sent oil prices plunging by agreeing last Thursday not to cut production.
- Among XLE’s most actively traded components, Kinder Morgan (KMI -3.3%), Halliburton (HAL -3.4%), Transocean (RIG -6.1%) and Schlumberger (SLB -2.1%) are sharply lower.
- Other big decliners include BBEP -17.8%, SD -12.1%, SN -13%, CWEI -8.8%, CPE -14.6%, EXXI -18.9%, LRE -22.8%, REI -16.9%, SSE -15.3%.
- Other ETFs: ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Nov. 28, 2014, 9:17 AM| 13 Comments
Nov. 28, 2014, 7:48 AM
- The oil market will need to balance via slower U.S. shale growth and OPEC cuts at some later date (their next meeting is on June 5), says Goldman's Brian Singer, maintaining his team's WTI oil price outlook of $70-$75 per barrel for next year.
- Among the energy sub-sectors, refiners and pipelines continue as favorites, and five of Goldman's eleven energy and utilities stocks on the Americas Conviction Buy list are from midstream/refining: KMI, MWE, PAGP, TRGP, TSO (all are lower premarket on oil's tumble).
- Not buyers of oil services and E&P names, Goldman nevertheless does have favorites in these areas: CRR, BAS, RIG.
Nov. 27, 2014, 5:11 AM
- Oil/energy and consumer-goods underperformers lead the way.
- Total return takes into account all distributions.
- Table of S&P 500's biggest total-return losers YTD
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
RIG vs. ETF Alternatives
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.
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