UPDATE: Citigroup Initiates Coverage on Transocean Partners LLC with Buy Rating, $28 PT as MLP is Partially Insulated from Re-Contracting

In a report published Monday, Citigroup analyst Mohit Bhardwaj initiated coverage on

with a Buy rating and $28.00 price target. In the report, Citigroup noted, “We are initiating coverage on Transocean Partners (RIGP) with a Buy/High Risk (1H) rating and a target price of $28.0 p/u. We believe the underperformance in RIGP since its IPO is underlined by a decline in crude prices and ensuing belief that weakness in demand for offshore drilling rigs will continue for a sustained period of time. RIGP is backed by Transocean (RIG), which currently has almost 80 rigs in service. Several of these rigs have contracts that have expired or are about to expire over the next 12 months. While concerns over contract renewal at the parent are legitimate, we believe the partnership (RIGP) is somewhat insulated from these issues given: 1) the inventory of assets that can be dropped down from the parent with long-term contracts from credit-worthy counterparties; and 2) the contracts on the existing assets at RIGP that are longer in duration.” Transocean Partners LLC closed on Friday at $18.75.