Wells Fargo Upgrading Vantage Drilling

Wells Fargo is out with a research report on Vantage Drilling Co. VTG and is upgrading shares to Outperform, and it has a $2 to $2.20 price target on shares. In a note to clients, Wells Fargo writes, "We are basing our $2.00-2.20 valuation range on a 15-20% premium to estimated NAV. We have valued VTG's fleet at $1.7B, including $800MM for the Platinum Explorer Drillship (with 4.5 years left on a $585K/day contract), $180MM each for the company's four modern jackups, $100MM of equity value in their newbuild drillship Tungsten Explorer, and about $50MM of value from their construction and rig management operations. An industry-average premium of 15% to this fleet NAV of $1.95B would yield roughly $600MM in equity value after deducting $1.35B of net debt (we grossed up VTG's book debt of $1.232B by $242MM to approximate its fair market value at 6% debt costs)." Shares of VTG closed at $1.54 yesterday.