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.
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."
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