Transocean May Be More Exposed Than Peers To Deteriorating Offshore Drilling Market

Argus reaffirmed its Hold rating on the shares of Transocean LTD RIG, premising the action on its concerns that the company may be more exposed than peers to deteriorating conditions in the offshore drilling markets.

Offshore: Flavor Of Town

The firm noted that there has been a secular shift away from deep-sea oil and gas to more cheaply accessed onshore fields. The trend, according to the firm, is due to the sharp decline in energy prices.

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The firm stated that the development is confirmed by Transocean's recent fleet report, showing a continued decline in the number of deep water drills operated under contract. Given that the sector is plagued by the shift, the firm is of the view that the deepwater rigs may be idled if the numerous contracts, coming up for renewal, are not renewed.

Delving on the second-quarter results released in early August, Argus noted that earnings and revenues fell steeply, belying the consensus loss forecast. The company's average day-rate also fell.

Raising Estimates

Argus raised its 2016 earnings per share estimate for the company to $0.60 per share from $0.40, which however, is below the consensus estimate. The firm also forecasts a narrower than expected loss for 2017, thanks to forecasts of stronger oil prices and increased drilling activity next year.

At time of writing, Transocean shares were up 6.84 percent at $10.70.

United States Oil Fund LP (ETF) USO shares were up 2.16 percent on the day at last check, trading at $10.88.

Similarly, the iShares Dow Jones US Oil Equip. (ETF) IEZ was up 2.36 percent at the same time, trading at $39.05.

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