Læs hele analysen af Transocean her.
Analyst Note, Jason Stevens, 2. december 2014
Offshore drillers' shares have continued their sell-off in the aftermath of OPEC's Thanksgiving Day meeting. At the meeting, OPEC elected to maintain existing production quotas, dashing the market's hope that the cartel would step in and remove excess crude oil supply from the market. By our estimates, oil markets are oversupplied by roughly 1 million barrels a day, which may increase into early 2015 absent a production response. We think that the market's reaction is overdone, particularly if you consider that 1 million-2 million barrels a day of excess supply is equivalent to 1.1%-2.2% of daily consumption, and depletion alone removes roughly 4% of total production each year. Moreover, the supply surge from U.S. shale oil has been well anticipated by the market, leaving us to wonder what has changed fundamentally in the market's awareness that has dropped the energy sector as a whole by 20% since Sept. 1. We suggest investors pay attention to oil demand, as any further weakness could spark another leg down in oil markets. That said, over the medium term we'd expect lower crude prices to stimulate demand, supporting our expectation of higher prices in the future.
While we are updating our fair value estimates to reflect current crude oil strip pricing, we think the market reaction among certain offshore drilling firms has been overdone. The makeup of rig fleets, leverage, and the risk of idle rigs as contracts roll over must be carefully considered in the current environment. While all the offshore drillers we cover are currently trading at a discount to our fair value estimates, we prefer Ensco based on its management quality and strong customer relationships and Rowan for its fleet of four brand new ultra-deep-water drillships, which were all contracted at day rates well above what the market is now providing.
Bulls and Bears say
Bulls say
- Transocean's maintains the largest and highest-specification fleet of ultra-deep-water and deep-water floating rigs in the industry.
- The deep-water market is positioned to expand substantially in the coming years because of large discoveries, and Transocean has positioned itself as the prime beneficiary.
- We forecast floater and jackup rig day rates will recover as Brent crude returns to our long-term midcycle estimate of $100/barrel.
Bears say
- A decline in day rates can have a substantial impact on Transocean. Semisubmersible day rates declined 21% during 2002-04 and 70% during 1998-99. Jackup day rates declined 70% during 1997-99 and more than 50% during 2008-10.
- Transocean estimates Macondo-related expenses, which include lost revenue, settlements, and legal expenses, total more than $4 billion.
- Transocean has ongoing tax disputes in the U.S., Brazil, and Norway, which could eventually be material. All three countries are seeking hundreds of millions of dollars in taxes.
©2014 Morningstar. All rights reserved. The information, data, analyses, and opinions contained herein (1) are proprietary to Morningstar, Inc. and its affiliates (collectively, “Morningstar”), (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be accurate, complete, or timely. Certain information may be self-reported by the investment vehicle and not subject to independent verification. Morningstar shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Past performance is no guarantee of future results.
