Noble Cut To Sell By Argus, Balance Sheet Said To Have Deteriorated

Argus downgraded Noble Corporation Ordinary Shares (UK) NE to Sell from Hold on declining offshore drilling activity and balance sheet concerns.

Analyst David Coleman noted that Noble continues to be pressured by a drop in offshore drilling activity, and has been hurt by lower fleet utilization and day rates.

Further, Noble will now face higher borrowing costs following credit downgrades from S&P and Moody's. In late April, Noble slashed its quarterly dividend to $0.02 from $0.15 to conserve cash.

"Based on these factors and the absence of positive catalysts, we believe that a SELL rating is now appropriate," Coleman wrote in a note.

The analyst cut his 2016 EPS estimate to $0.20 from $0.61, reflecting continued energy sector weakness and the downturn in drilling activity. The analyst also widened his 2017 loss estimate to $0.47 per share from $0.42 per share. The 2016 consensus EPS estimate is $0.04 and the 2017 consensus loss forecast stands at $1.02 per share.

Noble shares have underperformed over the past three months, falling 26.3 percent compared to a gain of 6 percent for the S&P 500. Over the past year, they fell 38.5 percent, compared to a gain of 5 percent for the index.

At time of writing, shares of Noble fell 2.43 percent to $7.02.