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A Host Of Upgrades For Offshore Oil Companies As RBC Sees A Recovery

A Host Of Upgrades For Offshore Oil Companies As RBC Sees A Recovery

RBC Capital Markets is the latest Wall Street firm to take a shot in the dark at the oil market, which has somehow managed to consistently perplex both bulls and bears in the past couple of years. On Friday, analyst Kurt Hallead upgraded the battered offshore oil group, stocks that have been among the hardest hit by the oil market slump.

According to Hallead, RBC is seeing “definitive signs” of a recovery in offshore oil rig activity, despite the fact that WTI crude oil prices remain below $50/bbl.

“We believe offshore stocks are now poised for a fundamental recovery, similar to '86-'90, '93-'98, and '03-'08 when these sectors produced annual average returns of 53% for 4-5 consecutive years,” Hallead wrote (see his track record here).

Related Link: Argus Initiates Baker Hughes At Buy, Sees 32% Upside From Here

As a result, RBC now has a bullish long-term outlook for offshore drillers and offshore services stocks and has upgraded a number of names:

  • Franks International NV (NYSE: FI) from Underperform to Outperform.
  • Oceaneering International (NYSE: OII) from Underperform to Outperform.
  • Diamond Offshore Drilling Inc (NYSE: DO) from Underperform to Sector Perform.
  • Noble Corporation Ordinary Shares (UK) (NYSE: NE) from Underperform to Sector Perform.
  • Rowan Companies PLC (NYSE: RDC) from Underperform to Sector Perform.
  • Transocean LTD (NYSE: RIG) from Underperform to Sector Perform.

RBC’s optimism is based on a number of offshore projects that will be coming online within the next two years, as well as offshore rig utilization on the rise and more positive commentary from management during Q2 earnings calls. Hallead also said there is potential for a consolidation wave in the fragmented space.

For now, at least, rig counts should continue to rise as long as Brent crude prices stay stable at around $50 per barrel, he concluded.

Latest Ratings for DO

Apr 2020RBC CapitalDowngradesSector PerformUnderperform
Mar 2020CitigroupMaintainsSell
Mar 2020BarclaysDowngradesOverweightEqual-Weight

View More Analyst Ratings for DO
View the Latest Analyst Ratings


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