Credit Suisse Just Downgraded Transocean, And Shares Are Falling

In a report published Tuesday, Credit Suisse analyst Gregory Lewis downgraded his rating on Transocean LTD RIG from Neutral to Underperform, but reiterated a $12.00 price target.

In the report, Credit Suisse noted it is "downgrading to Underperform (from Neutral) and maintaining [a] $12 TP.

"Our $12 TP is 6x our 2016 EBITDA estimate," they add. "The down-cycle should be more painful for RIG than most owing to its mix of some new and a lot of old rigs. RIG has ten idle floaters (3 in GoM, 2 in WAFA, 3 in SE Asia, 1 in NSea, 1 in transit) – accounting for 15% of RIG's 2014 revenue."

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The firm estimates 54 percent of its 2014 revenue is "at risk" over the next two years, "mainly due to floater contract roll-offs." Credit Suisse expects Transocean to stockpile rigs through 2016.

"Tough times ahead," the analyst concludes.

Transocean closed on Monday at $20.44, up 10 percent. Shares are down more than 3 percent in Tuesday's pre-market trading.

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