Jefferies Comments on Transocean (RIG) Following FSR; Disappointed in 'Expedition' News, But Sees Upside
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Rating Summary:
12 Buy, 17 Hold, 14 Sell
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Up: 8 | Down: 5 | New: 26
Rating Summary:
12 Buy, 17 Hold, 14 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Jefferies issued comments on Transocean (NYSE: RIG) Tuesday, following its Fleet Status Report. The firm maintained a Buy rating and $80 price target on Transocean.
Limited additional downtime was reported in the first FSR of 2012, but Transocean did disclose that Petronas Carigali and BHP (BNYSE: BHP) wish to terminate the contract on the Deepwater Expedition for nonperformance. The firm commented, "The UDW drillship, which was under contract through January 2014 at a dayrate of $641k, was in the shipyard for BOP inspection and repair for 55 days in 3Q11, all of 4Q11, and is now expected to be in the yard all of 1Q12. If the contract is ultimately canceled and the rig is down for the first half of 2012 and returns to work at current leading edge rates, we estimate that it would be an approximate $0.25-$0.30 hit to our 2012 EPS estimate of $3.21."
Despite the termination notice, Jefferies sees the Expedition to get another contract from somewhere. The firm notes, "most likely, in our view, is that the parties ultimately agree to a new contract at a discounted dayrate (assuming the BOP is ultimately certified) primarily due to the fact there are virtually no UDW rigs available until 2013. As a result, the Expedition may likely be Petronas' and BHP's only real option for a rig outside of a sublet (or sublets) until more rigs are available in 2013."
Downtime was about 200 days lower than Transocean's prior outlook, and Jefferies expects fiscal 2012 down time of about 300 days or more, which reflects "increases of nearly 400 days for their standard jack-ups and around 200 less days on deepwater floaters."
Though the Expidition news was disappointing for Jefferies, the firm said any positive news related to the rig or overall improvements on downtime would be positive for the stock.
For an analyst ratings summary and ratings history on Transocean click here. For more ratings news on Transocean click here.
Shares of Transocean closed at $40.31 yesterday.
Limited additional downtime was reported in the first FSR of 2012, but Transocean did disclose that Petronas Carigali and BHP (BNYSE: BHP) wish to terminate the contract on the Deepwater Expedition for nonperformance. The firm commented, "The UDW drillship, which was under contract through January 2014 at a dayrate of $641k, was in the shipyard for BOP inspection and repair for 55 days in 3Q11, all of 4Q11, and is now expected to be in the yard all of 1Q12. If the contract is ultimately canceled and the rig is down for the first half of 2012 and returns to work at current leading edge rates, we estimate that it would be an approximate $0.25-$0.30 hit to our 2012 EPS estimate of $3.21."
Despite the termination notice, Jefferies sees the Expedition to get another contract from somewhere. The firm notes, "most likely, in our view, is that the parties ultimately agree to a new contract at a discounted dayrate (assuming the BOP is ultimately certified) primarily due to the fact there are virtually no UDW rigs available until 2013. As a result, the Expedition may likely be Petronas' and BHP's only real option for a rig outside of a sublet (or sublets) until more rigs are available in 2013."
Downtime was about 200 days lower than Transocean's prior outlook, and Jefferies expects fiscal 2012 down time of about 300 days or more, which reflects "increases of nearly 400 days for their standard jack-ups and around 200 less days on deepwater floaters."
Though the Expidition news was disappointing for Jefferies, the firm said any positive news related to the rig or overall improvements on downtime would be positive for the stock.
For an analyst ratings summary and ratings history on Transocean click here. For more ratings news on Transocean click here.
Shares of Transocean closed at $40.31 yesterday.
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