Skip to main content

Market Overview

Pacific Drilling, Seadrill Downgraded At Credit Suisse; Notes Drilling Recovery Delayed Until At Least 2018

Share:
Pacific Drilling, Seadrill Downgraded At Credit Suisse; Notes Drilling Recovery Delayed Until At Least 2018

In a report published Thursday, Credit Suisse analyst Gregory Lewis maintained an Underperform rating on the entire Offshore Drillers sector, while simultaneously downgrading Seadrill Ltd (NYSE: SDRL) to Underperform from Neutral (with a price target lowered to $5 from a previous $7) and Pacific Drilling SA (NYSE: PACD) to Neutral from Outperform (with a price target lowered to $3 from a previous $4).

Lewis said the Offshore Drilling sector will recover, but while bulls point towards a 2017 recovery, bears are pointing towards a recovery only starting early next decade. The analyst suggested a base case which is in the middle of the bull and bear timeline and expects a recovery to begin in 2018/2019.

"While the timing of the recovery, dayrates and multiples matter (we will return to midcycle eventually), the biggest question around most companies value is what will their fleet look like for the next cycle," Lewis wrote.

Related Link: Can Schlumberger Outperform The Market? Citi Thinks So

Lewis added that the market is showing several "signs of distress." Specifically, the pending sale of the Deepsea Metro II appears to have garnered only one bid at $300 million, which the analyst argued is "well below" the estimated debt on the rig of $500 million. With that said, the market is poised to undergo more distressed sales which should see net asset values drop through pricing.

Bottom line, Lewis argued that the sector "will get worse before getting better," however it will (eventually) get better.

Other Material Changes:

  • Shares of Atwood Oceanics, Inc. (NYSE: ATW) were maintained at Neutral with a price target lowered to $18 from a previous $24.
  • Shares of ENSCO PLC (NYSE: ESV) were maintained at Neutral with a price target lowered to $14 from a previous $18.
  • Shares of Noble Energy, Inc. (NYSE: NBL) were maintained at Outperform with a price target lowered to $16 from a previous $18.

Latest Ratings for SDRL

DateFirmActionFromTo
Aug 2019BTIG ResearchDowngradesBuyNeutral
Oct 2018BTIG ResearchInitiates Coverage OnBuy
Jul 2016Morgan StanleyDowngradesOverweightEqual-Weight

View More Analyst Ratings for SDRL
View the Latest Analyst Ratings

 

Related Articles (SDRL + PACD)

View Comments and Join the Discussion!

Posted-In: Credit Suisse Gregory Lewis offshore drillersAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
HR.UNCIBCMaintains17.0
FDGECIBCMaintains20.0
SNCCIBCMaintains40.0
APENLake StreetInitiates Coverage On12.0
PATHMacquarieInitiates Coverage On69.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com