Offshore drillers are navigating choppy seas today–and its not just Seadrill (SDRL) that has problems, as analysts reiterated sell ratings on Transocean (RIG) and Noble (NE) today.
Bloomberg News The folks at Deutsche Bank worry about Transocean’s ability to fund its dividend, maintain capex and pay down debt:
We commend Transocean for asking us to host the rarely seen road show for a SELL rated company. As it turns out, we agree on most points including the offshore drilling market (bad, likely to get worse), Transocean’s efforts toward fleet renewal (progressing well) and margin improvement (better/ faster than expected). Our biggest concern remains Transocean’s ability to simultaneously fund its dividend, ongoing CAPEX requirements and debt reduction (maintain an investment grade rating). It appears to us that Transocean is counting on continued funding from MLP drop downs and asset sales, assumptions we are not willing to make at this late stage in both the interest rate and offshore drilling cycles.
5 Best Defensive Stocks To Own Right Now
The Zephirin Group’s Longdley Zephirin cut his price target on Noble and reiterated his Sell rating:
We are very concerned that Noble Corp.s' semis/UDW backlog which is now heavily reliant on the US GOM market at $5.3Bil or 55.8% of the total backlog of approximately $9.5Bil (+bonus). We expect a declining day rate environment to negatively impact US GOM EBITDA and earnings…
The Danny Adkins day rate went from $474k in May 2011 to $498k working for Shell through Sept-14. Now the rig is slated to work for DGE at $317k for 200 days in the US GOM. Also, the Jim Thompson is expected to complete its contract on Dec-14 at $376k for Shell. Afterwards, the rig will enter the shipyard for 135 days, followed by a one year contract for Hess (HES) at $300k/day…
We are reiterating our SELL rating and lowering our price objective to $23.00 from $26.00 per share.
Shares of Noble have fallen 1.4% to $25.59 at 2:30 p.m. today, while Transocean has dropped 0.5% to $35.68. Hess has gained 1.4% to $98.33.
No comments:
Post a Comment