Oceaneering Shares Downgraded To Underperform At Jefferies

In a report published Tuesday, analysts at Jefferies downgraded

from Hold to Underperform. The price target was also reduced from $52 to $49. The analysts expressed the weak order outlook as well as the recent recovery in the company's share price/ The analysts expressed their concern regarding IOC project sanctioning over the next two or more years, while stating that the regional deepwater cost curve appears attractive mainly in the Gulf of Mexico and Brazil's Santos basin. There are various challenges facing deepwater development and IOCs at present, including political constraints and lack of fiscal clarity, cash flow limitations for IOCs, external challenges like the Brazil corruption scandal, unfavorable geology, adverse impact of the post-Macondo environment and cost estimate risks. Jefferies also believes that "the industry could sanction as few as five large projects in '15 and '16 vs. 47 deepwater projects that are currently in construction. Yet the resolution of cost woes in the industry appears to be a slow process." Attempts to lower costs could take time to show results, although the analysts expect cash flow constraints to ease by 2017. In addition, a recovery in oil prices, along with the completion of current capital commitments by IOCs, is likely to free up cash for investment in growth projects. The analysts also expect to see an significant increase in project sanctioning by 2017.