Barclays Slashes Target On Transocean Partners, Payout Not At Risk

Transocean Partners LLC RIGP, set to post fourth-quarter results after the bell Wednesday, isn't at risk of cutting its dividend but faces "uncertainty" in light of lowered demand for offshore drilling rigs, an analyst said Tuesday.

The company changed hands recently at $13.66, down 8 percent.

Citing uncertainty, Barclay's analyst Richard Gross downgraded the company to Underweight and slashed his price target more than 28 percent to $16.

The operation's parent company, Transocean Ltd RIG, earlier this month proposed cutting its own annual dividend by 80 percent to $0.60 a share, in order to support an investment-grade rating on its debt. The company also said Chief Executive Steven Newman will step down.

Gross, whose firm separately rates Transocean Ltd. Underweight, said Transocean LLC's dividend doesn't face a similar risk.

But Gross said one of the company's three rigs, the Development Driller III, has a contract set to expire "at a relatively near date" in November of 2016.

If that rig were to begin operating at current market rates, Transocean LLC "wouldn't be able to increase its distribution," Gross said.

The company, which operates three deepwater rigs in the Gulf of Mexico, got spun out of the larger Transocean Ltd. in an initial public offering last July at $22.

In making the offering, Transocean Ltd.'s action was likened to the so-called drop-down strategies of master limited partnerships in which infrastructure companies spinoff assets.