Wells Fargo Cuts Valuation Range on Transocean (RIG), Sees Board Cutting Dividend Below $1
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Price: $5.76 +0.70%
Rating Summary:
12 Buy, 17 Hold, 14 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
12 Buy, 17 Hold, 14 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wells Fargo is reaffirming its Outperform rating on shares of Transocean (NYSE: RIG), but is lowering its valuation range from $63-$72 to $62-$64.
The company's confirmation that it's Deepwater Expedition had its contract cancelled has caused the firm to lower its estimates. The firm believes the company will have no problem finding a new customer for the rig by mid Q2, but anticipates it at a much lower rate. The previous contract called for $640,000 per day, were as the new contract may only bring in $500,000 per day, the difference may be as much as $110 million for year on this rig alone.
Sine the company's Discoverer 354 and Transocean Richardson deep water rigs have yet to see contracts, Wells Fargo sees another $100 million in downside to its 2012 revenue estimate.
The firm is reaffirming its Q4 and FY11 EPS estimates of $0.21 and $1.36, but is reducing its Q1 and FY12 estimates from $0.41 and $2.88 to $0.30 and $2.46.
An analyst at Wells Fargo comments, "We believe RIG will benefit from a recovery in the GOM deepwater drilling market over the next year, as well as increased demand in Brazil, West Africa and Asia. Even incorporating a $1B liability for Macondo in RIG's valuation, we believe RIG is compellingly valued. We expect RIG to cut its dividend to below $1/share and use its FCF to reduce debt."
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.
The company's confirmation that it's Deepwater Expedition had its contract cancelled has caused the firm to lower its estimates. The firm believes the company will have no problem finding a new customer for the rig by mid Q2, but anticipates it at a much lower rate. The previous contract called for $640,000 per day, were as the new contract may only bring in $500,000 per day, the difference may be as much as $110 million for year on this rig alone.
Sine the company's Discoverer 354 and Transocean Richardson deep water rigs have yet to see contracts, Wells Fargo sees another $100 million in downside to its 2012 revenue estimate.
The firm is reaffirming its Q4 and FY11 EPS estimates of $0.21 and $1.36, but is reducing its Q1 and FY12 estimates from $0.41 and $2.88 to $0.30 and $2.46.
An analyst at Wells Fargo comments, "We believe RIG will benefit from a recovery in the GOM deepwater drilling market over the next year, as well as increased demand in Brazil, West Africa and Asia. Even incorporating a $1B liability for Macondo in RIG's valuation, we believe RIG is compellingly valued. We expect RIG to cut its dividend to below $1/share and use its FCF to reduce debt."
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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