Barclays Sees Trouble For Offshore Drillers

In a report published Thursday, Barclays analyst J. David Anderson argued that Offshore Drillers stocks could see further downside despite already declining around 30 percent on average since June 11. Anderson continued that floater retirements have stalled recently, making little headway for the 60-70 additional floater retirements that the industry needs to rebalance the market. In fact, there have been 38 floater retirements since last October but only three since June as contractors appeared to "hit the pause button" on retirements when oil briefly rallied in April and May. Anderson also added that "market attrition simply won't take place fast enough" for the market to rebalance given the 51 floater newbuilds under construction that are expected to be delivered through the end of 2017. Finally, the analyst pointed out that

and

have already announced exploration spending cuts with more companies likely to follow. "Overall, we also expect offshore spending to decline double digits again in 2016 as operators wait for signs of oil price stability and lower development costs before committing resources," Anderson concluded. "Offshore drilling industry fixtures remain sparse with only 4 significant floater contract announcements in all of 2015 and a handful of "blend and extend" renegotiations at day rates near cash breakeven costs."

Anderson made one rating change and eight price target changes to companies under his coverage: