Transocean Outlook Still 'Challenging,' Argus Analyst Says

Argus analyst David Coleman said the outlook for Transocean LTD

remains "challenging," as he is concerned that the company is more exposed than peers to deteriorating conditions in the offshore drilling market. Transocean, the world's largest offshore contract drilling company, has seen reduced demand for its services as E&P and integrated international energy companies have shifted their focus away from hard-to-reach deep-sea oil and gas to more cheaply accessed onshore fields. In keeping with this shift, Transocean's recent fleet report shows that the number of deepwater rigs operating under contract continues to decline. In addition, numerous deepwater rigs are up for contract renewal in the coming year, and may be idled if new contracts are not signed. Coleman, who reiterated his Hold rating on RIG shares, has cut his 2016 earnings estimate to 20 cents a share from 40 cents a share. The 2016 consensus forecast calls for earnings of 21 cents. The analyst set a 2017 loss forecast of 70 cents a share, compared to a consensus loss estimate of 73 cents a share. "We expect market conditions to remain challenging and look for low commodity prices to weigh on fleet utilization this year," Coleman said in a note to clients. RIG shares have underperformed over the past three months, falling 13.9 percent, while the S&P 500 has declined 4.1 percent. They have fallen 26.5 percent over the past year, while the index has dropped 4.4 percent. Currently, they were down 2 percent at $10.93.