The Research Note Destroying RigNet Shareholders

In a report published Wednesday, analysts at Oppenheimer downgraded RigNet, Inc. RNET from Outperform to Perform. The company reported its 1Q15 revenue and EBITDA below the estimates. The company witnessed at 10.4 percent sequential decline in revenue during Q1, driven by 216 site losses and decline in ARPU. The analysts expect the company to, however, report in-line EPS for the quarter due to lower taxes. The company installed 14 offshore rigs during the quarter, of which 11 were "cold stacked." "While adding three offshore rigs in the quarter was impressive given current market conditions, we believe the energy markets will remain challenged and RNET will see top-line sequential declines due to continued cold/warm/hot stacking of rigs in both 2Q/3Q," the analysts said. Oppenheimer expressed concern regarding the lack of visibility into the outcome of rigs being "hot stacked" as well as the stock valuation. Given the increased oil supply, the analysts believe that the environment continues to be challenging for the company. The analysts have lowered their 2015 and 2016 estimates for the company "to reflect lower oil prices, continued elevated oil supply, and the risk of rigs continuing to be hot/ warm/cold stacked."