Wed, Aug. 26, 10:46 AM
- Transocean (RIG -3.3%) opens down but off premarket lows following news of its plans to suspend dividend payouts and book 2B Swiss francs ($2.1B) in asset impairments; other offshore drilling contractors trade mixed.
- Raymond James says RIG's move is prudent given the difficulties facing the offshore drilling market: "All in on an annual basis, the cancellation of the dividend would result in $220M in retained liquidity... We view this as prudent as [RIG] can use the cash to improve its own liquidity or work to eventually high grade its fleet."
- Cowen notes the decision comes as somewhat of a surprise, since the dividend had been approved by shareholders last May, and adds the move could be seen as an indication that the market has grown incrementally worse in just the three weeks since RIG Aug. 6 earnings call.
- Offshore peers: DO +1.2%, SDRL +2.2%, ESV +0.3%, RIGP +0.3%, RDC -0.1%, ATW -0.2%, NE -2.2%, VTG -4.3%, ORIG -1.5%, PACD flat.
Tue, Aug. 25, 5:40 PM
Tue, Aug. 25, 4:48 PM
- Transocean (NYSE:RIG) -6.2% AH after its board proposes cancellation of the third and fourth installments of RIG's dividend; it was previously paying a $0.15 quarterly dividend.
- The board also will propose cancellation of all shares that have been repurchased to date under the company's share repurchase program.
- In light of the deterioration of the offshore drilling market and concerns regarding the timing of the market's recovery, RIG says it may recognize an aggregate loss associated with related non-cash impairments in excess of 2B Swiss francs.
Mon, Aug. 10, 3:38 PM
- Transocean (RIG +6.5%) is sharply higher after Jefferies upgrades shares to Neutral from Underperform with a $13 price target, as the firm is now "more comfortable" with RIG's position even as the company still faces challenging market conditions.
- The firm sees three incremental positives for RIG: "material" operating expense savings potential, a strong liquidity position, and a "better appreciation for the quality of the fleet and overall operations" [which] could lead to "modest... upside surprise potential."
- Jefferies also foresees no liquidity constraints in the near and medium-term, even though RIG has among the highest leverage among competitors.
Thu, Aug. 6, 3:30 PM
- Crude oil futures extended their slide today, falling another 1.1% to below $45/bbl, weighed by the global supply glut, a strengthening dollar and concerns about China’s economy.
- Goldman Sachs today joined the group that expects crude prices will remain "lower for longer" to allow the oil market to find equilibrium, maintaining its near-term target for U.S. crude at $45/bbl but warning that risk is skewed substantially lower.
- Along with a further deterioration in fundamentals, "the financial markets' decreasing confidence in a quick rebound in prices and a recognition that the rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market," Goldman writes.
- Unlike yesterday, however, the energy sector has rebounded after starting out today's session as the weakest equity performer; several notable energy companies, including Transocean (RIG +13.3%), Diamond Offshore (DO +7.6%), Newfield Exploration (NFX +6.2%) and Ensco (ESV +7.4%) turned in quarterly results that beat expectations, defying concerns that weak energy earnings will weigh on the S&P 500.
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Wed, Aug. 5, 7:32 PM
- Transocean (NYSE:RIG) +3.9% AH after easily beating Q2 earnings and revenue estimates, citing "exceptional revenue efficiency and a relentless emphasis on cost management."
- Demand for offshore rigs declined because of the oil slump, as RIG's Q2 fleet utilization fell to 75% from 79% in Q1 and 78% in the year-ago period; for H1, fleet utilization was slightly down at 77%, vs. 78% a year ago.
- RIG says it contract backlog totaled $18.6B as of July 15, down from $19.9B as of April 16 and $21.2B on Feb. 17; Shell and Chevron accounted for a respective 41% and 20% of RIG's contract backlog as of Feb. 17, with further cuts likely ahead as crude oil still trades below their lowered price assumptions.
- RIG's Q2 cash flows from operating activities were $1.31B, up from $526M in Q1, primarily due to $445M of Macondo-related insurance recoveries.
- Wrote down $653M in charges associated with an impairment of the midwater floater asset group primarily due to the deterioration of the market outlook for the rig class, and another $144M related to the impairment of assets held for sale.
Wed, Aug. 5, 5:32 PM
Fri, Jul. 17, 3:26 PM
- ConocoPhillips’ (COP -1%) cancellation of a contract with Ensco (ESV -5.9%) "calls backlog sanctity into question for offshore drillers," raising uncertainty about contracted newbuild rigs even though COP has been vocal about tightening offshore exploratory spending since March, J.P. Morgan analyst Sean Meakim writes.
- Backlog uncertainty will remain an overhang until major operators prove commitment to their drilling programs, and exposure to Petrobras (PBR -5.4%), Shell (RDS.A -0.1%) and Chevron (CVX -1.1%) could serve as a headwind until the binary risk to contracts is resolved through dayrate renegotiations or terminations, according to Meakim.
- The firm maintain a negative outlook on the offshore drillers, with an Underweight rating on ESV, Noble Corp. (NE -4.3%) and Transocean (RIG -7.1%).
- Earlier: Offshore drillers under heavy pressure
Fri, Jul. 17, 11:32 AM
- Offshore drillers are significantly underperforming the broader market following cautious commentary from Schlumberger (SLB -0.1%) despite its Q2 earnings beat, a contract termination and an analyst downgrade.
- On its earnings call this morning, SLB said it expects little improvement in pricing levels in the near future and declines in activity for offshore drillers, while land rigs provide a more attractive opportunity and better margins.
- For its Q3, SLB foresees a further 5%-6% decline in Q/Q revenue as well as lower EPS, and says the $0.77 consensus is a realistic number.
- Yesterday, ConocoPhillips (COP -1.8%) said it plans to cut future deepwater exploration spending, particularly in its operated Gulf of Mexico program; in light of the decision, COP is terminating a contract for an Ensco (ESV -4.9%) deepwater drill ship.
- Also, UBS today downgraded National Oilwell Varco (NOV -1.5%) to Sell from Neutral.
- SDRL -6.4%, RIG -4.7%, RDC -6%, DO -3.3%, ATW -4.2%, HP -1.2%, PTEN -1.2%, PACD -5.7%.
Mon, Jul. 6, 3:48 PM
- A recovery in offshore drillers such as Transocean (RIG -4.5%), Diamond Offshore (DO -2.2%), Atwood Oceanics (ATW -3.7%), Rowan (RDC -2.3%) and Noble Corp. (NE -1.9%) may be further off than expected, Susquehanna analysts say.
- After believing that an acceleration in the rate at which rigs are being cold stacked or retired could suggest the start of an industry recovery in H2 2016, the firm says the fact that newer, high-specification rigs are now rolling off contract without being renewed points to a more protracted downturn than previously anticipated.
- The firm says RIG and DO possess the oldest ultra-deepwater fleets, with average respective ages of 9 and 17 years old; given the competitive disadvantages of relatively old fleets, free cash flow yields for the companies will be negative (-28% for RIG, -9% for DO) in 2016.
- Susquehanna says the drillers were able to beat its estimates for drilling costs in Q1 by 6% on average, but part of the cost savings were the result of cost deferments, particularly expenses related to repairs and maintenance.
Fri, Jun. 19, 12:48 PM
- The bad news facing offshore drillers such as Transocean (RIG -1.4%), Seadrill (SDRL -2%), Ensco (ESV -1.2%) and Noble Corp. (NE -2.3%) convince Wells Fargo to remain bearish on the sector.
- The firm says the last 48 hours have produced a "golden sombrero" for the offshore drilling sector with Hercules Offshore filing for bankruptcy, Chevron (CVX -0.6%) reportedly canceling a high profile ultra-deepwater tender in the Gulf of Mexico, and ESV and NE each disclosing notably negative fleet status reports.
- Wells rates ESV and NE at Market Perform, but RIG and SDRL are rated Underperform; RIG faces “significant risk to global floater market deterioration and funding risk balancing newbuild payments and debt maturities," while SDRL's high quality fleet is outweighed by "significant funding risk for debt repayments and newbuild commitments.”
Thu, Jun. 18, 12:28 PM
- Shares of offshore drillers such as Ensco (ESV -5.2%), Transocean (RIG -2.4%) and Seadrill (SDRL -3.4%) are tumbling today, as fleet status updates continue to show tough times ahead for the group.
- In the latest update, ESV said it had agreed to reduce the rate it charged Total (NYSE:TOT) for one ultra-deepwater drillship and reduce the length of the contract on a second ship by six months; two floaters and two jackups also finished contracts and are now idle.
- RBC analysts say they do not expect a bottom in the overall offshore rig count until mid-2016 at the earliest and expect rates and utilization to remain challenged in the interim.
- Also: NE -3%, RDC -1.7%, DO -2.1%, ATW -2%, ORIG -6%, PACD -15.1%.
Fri, Jun. 12, 10:29 AM
- The year-long oil price rout has depressed Pacific Drilling’s (PACD +4.9%) market value by nearly two-thirds, making it an attractive takeover target for operators looking to strengthen their presence in ultra-deepwater drilling, Bloomberg writes.
- PACD already has garnered interest from larger rivals such as Ensco (ESV -1.2%), Transocean (RIG -2.8%) and Seadrill (SDRL -1.9%) in the last 12-18 months, with one of the approaches coming as recently as this year, according to the report.
- PACD is not believed to be actively exploring a sale, but the shares are trading well below replacement value for the rigs that they own, Evercore analyst James West points out.
Thu, Jun. 11, 2:26 PM
- Barclays rolls out coverage of offshore drillers (NYSEARCA:OIH) with a negative outlook, saying "the worst has yet to pass" as customers deal with the low oil price environment and a heavily oversupplied offshore rig market.
- While the stocks likely would rally with higher oil prices (and short covering), fewer rigs then would be retired on the hope of demand improving, preventing the necessary catharsis the industry needs, the firm says, adding that based on its rig-based distributable cash flow valuation methodology, the group's risk/reward profile is not attractive.
- The firm starts shares of Ensco (ESV -3.1%), Rowan Companies (RDC -3.1%), Atwood Oceanics (ATW -5.7%) and Pacific Drilling (PACD -2.7%) with Equal Weight ratings, and Transocean (RIG -5%), Diamond Offshore (DO -4.4%), Noble Corp. (NE -3.9%) and Ocean Rig UDW (ORIG -6.4%) with Underweight ratings, the firm's sell rating equivalent.
Fri, May 29, 3:57 PM
- Rowan (RDC -1.5%) stands out in the otherwise troubled offshore drilling contracting sector, J.P. Morgan analysts say, highlighted by its mix of incumbent jackups, strong high-spec UDW contract coverage and minimal newbuild capex.
- But JPM sees trouble for most of the other names in the group, with dayrates and utilization likely continuing to trend downward for both floaters and jackups as demand remains tepid and supply growth from newbuild deliveries outstrips fleet attrition.
- While JPM assigns RDC an Overweight rating and a $26 price target, it Underweights Ensco (ESV -2%), Noble (NE -2.1%) and Transocean (RIG -0.7%), citing strong leverage to asset classes, regions or customers that could prove challenged; Neutral-rated Diamond Offshore (DO -0.9%) faces similar challenges but the firm thinks more of the bad news is priced into its shares.
- The firm believes the recent run in the sector is commodity-driven short covering and likely to prove fleeting.
- Earlier: Halliburton, Schlumberger stand out in battered oil services, J.P. Morgan says
Thu, May 21, 12:45 PM
- Transocean (RIG +4%) powers higher a day after reaching an agreement with BP (BP +2%) that could finally put claims from the 2010 Deepwater Horizon oil spill behind it.
- The settlement is excellent news that immediately reduces a major element of uncertainty for RIG and eliminates a huge overhang on the company's balance sheet and cash flow statements, Zephirin Group says, adding that it incrementally adds to current liquidity of ~$5.6B.
- Zephirin reiterates its Strong Buy rating and $34 price target after shares have dropped 79% since the spill.
- Shares of Halliburton (HAL +2.9%), which also agreed to settle remaining spill-related claims with BP, also are higher.
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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