Market Overview

Could Ocean Rig Be The First Of The Deepwater Dominoes To Fall?

Share:
Could Ocean Rig Be The First Of The Deepwater Dominoes To Fall?
Related ORIG
Mid-Afternoon Market Update: Dow Gains Over 50 Points; L Brands Shares Drop On Weak Forecast
Mid-Day Market Update: AXT Rises After Strong Q4 Results; Cyclacel Pharma Shares Tumble
Related ESV
Watch These 5 Huge Call Purchases Tuesday
Benzinga's Option Alert Recap From July 10

Ocean Rig UDW Inc. (NASDAQ: ORIG) shares plunged more than 61 percent in Friday’s session after the company reported it's continuing to explore the possibility of bankruptcy. Deepwater drilling investors were hoping that crude oil’s surge from February’s low of near $26/bbl to above $51/bbl in June would be enough to keep deepwater stocks afloat. However, a pullback in recent weeks to the low $40s may have extinguished the last bit of hope that Ocean Rig can avoid a bankruptcy.

The Ocean Rig news seems to have served as a reality check for other deepwater stocks as well. Transocean LTD (NYSE: RIG) shares fell 4.5 percent on Friday, and ENSCO PLC (NYSE: ESV) shares dropped 3.8 percent to close the week.

The market appears to be re-thinking its knee-jerk selloff on Monday, however, as both Transocean and ENSCO have recovered much of their Friday losses.

Earlier this month, Susquehanna upgraded Transocean from Negative to Neutral.

Related Link: JPMorgan Sees Opportunity In Oil Services, Says M&A Will 'Take Backseat'

JPMorgan analyst Sean Meakim doesn’t share the bullish sentiment. In May, Meakim specifically urged investors to avoid offshore oil plays ENSCO, Transocean and Noble Corporation Ordinary Shares (UK) (NYSE: NE).

“Highly-levered offshore drillers in particular have mostly exhausted cost reductions and are now tapping the capital markets to avoid longer term cash flow hurdles,” he wrote.

Still, at their current depressed share prices, if these offshore drillers can continue to avoid bankruptcy until the oil market significantly improves, the stocks could make for a compelling high-risk speculation play.

Latest Ratings for ORIG

DateFirmActionFromTo
Aug 2016BarclaysTerminatesUnderweight
Aug 2016Deutsche BankDowngradesBuyHold
May 2016Deutsche BankMaintainsBuy

View More Analyst Ratings for ORIG
View the Latest Analyst Ratings

Posted-In: JPMorgan Sean MeakimAnalyst Color Commodities Opinion Markets Analyst Ratings Movers Best of Benzinga

 

Related Articles (ESV + NE)

View Comments and Join the Discussion!