Market Overview

Simmons On Oil Service: Upgrades Diamond Offshore, Downgrades Noble, Ocean Rig

Share:
Simmons On Oil Service: Upgrades Diamond Offshore, Downgrades Noble, Ocean Rig
Related DO
Mid-Afternoon Market Update: Crude Oil Down 3.5%; Thor Industries Shares Surge On Earnings Beat
The Market In 5 Minutes: A Merger Monday For Michael Myers
Offshore Drilling: The Return Of P/B Argument (Seeking Alpha)
Related NE
Benzinga's Top Upgrades, Downgrades For January 12, 2017
The Market In 5 Minutes: Adobe, Oracle Take The Earnings Stage
Schlumberger signs two long-term Transocean service agreements (Seeking Alpha)

Simmons & Co, energy specialists of Piper Jaffray, mentioned that stocks of offshore drillers have exhibited extreme volatility in recent weeks. Analyst Ian Macpherson commented that the recent rally in crude was among the few factors leading to the “short squeeze across beta energy and the outer limits of the risk complex system-wide.”

A move from ~$30/bbl to ~$40/bbl Brent crude means little to offshore rig fundamentals, which require substantially and sustainably higher prices to propel a multi-year recovery process, Macpherson said.

Diamond Offshore Drilling

Macpherson upgraded the rating for Diamond Offshore Drilling Inc (NYSE: DO) from Underweight to Neutral, while raising the price target from $16.50 to $19.

The analyst believes that Diamond Offshore’s strength lies in its relatively better balance sheet and a more substantial backlog. He wrote, “DO's most obvious company-specific investment risks would include backlog cancellation/collection issues and above average fleet obsolescence risk.”

Noble Corporation

Macpherson downgraded the rating for Noble Corporation Ordinary Shares (UK) (NYSE: NE) from Neutral to Underweight, while reducing the price target from $8.25 to $6.50.

Noble’s shares have gained 4 percent year-to-date, versus a 0.2 percent increase in the OSX. “Company-specific investment risks include backlog cancellation/collection issues, as well as moderate and possibly underappreciated balance sheet risk (4.5x-5.5x estimated peak leverage),” the analyst added.

Ocean Rig

Macpherson downgraded the rating for Ocean Rig UDW Inc (NASDAQ: ORIG) from Neutral to Underweight, while reducing the price target from $1.00 to $0.65.

Investors are concerned about the company’s ability to meet its future debt maturities besides making progress payments on three spec drill ships under construction, the analyst mentioned.

Latest Ratings for DO

DateFirmActionFromTo
Jan 2017BarclaysUpgradesUnderweightEqual-Weight
Dec 2016RBC CapitalDowngradesSector PerformUnderperform
Oct 2016CLSAUpgradesSellUnderperform

View More Analyst Ratings for DO
View the Latest Analyst Ratings

Posted-In: Ian MacphersonAnalyst Color Short Ideas Upgrades Downgrades Price Target Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (DO + NE)

View Comments and Join the Discussion!