Wednesday, February 24, 2016 3:58:36 PM
They have lost a couple contracts. I'm really curious how this will all pan out.
The one they lost today was an uncompensated contract. But the loss would impact the next quarter, right? Not this one.
It still doesn't fair well with investors.
It's gonna be a struggle for RIG. If they survive it will be a nice LT stock. Especially if it hits your $5 you mentioned.
Transocean Loses Another Rig; Who’s Next in West Africa?
http://blogs.barrons.com/stockstowatchtoday/2016/02/24/transocean-loses-another-rig-whos-next-in-west-africa/?mod=yahoobarrons&ru=yahoo
By Ben Levisohn
Transocean (RIG) announced yesterday that Esso Exploration Angola, an Exxon Mobil (XOM) subsidiary, had terminated a contract on one of it rigs. RBC’s Kurt Hallead has the details:
Bloomberg News
The event: Transocean announced that Exxon has decided to early terminate its contract for the GSF Development Driller I in Angola. The rig was under contract through June 2017. There will be no early termination payment to Transocean as the contract was fully uncompensated. We note this was Transocean’s final uncompensated rig contract.
Impact: If the rig is warm stacked, the estimated EPS impact would be ~$0.10-$0.12….
Net takeaway is negative on the uncompensated early termination of the GSF Development Driller I. This is another data point highlighting the continuing deterioration of the deep-water market as is Kosmos Energy’s (KOS) recent decision to idle the Atwood (ATW) Achiever.
We believe Transocean shares have limited upside until the market gains more confidence in the supply/demand outlook for floating rigs in 2017-18.
Currently, fundamentals continue to weaken for floating rigs, and it remains unclear when dayrates and utilization may bottom.
Zephirin Group’s Longdley ‘Lenny’ Zephirin sees more cancellations in West Africa:
This termination is not a surprise because we warned about the high risk of contract termination/amendment in West Africa in our February-16 research report. As such, we expect to see this negatively impact Transocean’s and the sector share price performance.
Standing on Egg Shell. The following three companies dominate the West Africa backlog market, Seadrill Ltd. (SDRL) at $3.7 billion (38.6% mkt share), ENSCO PLC (ESV) at $2.0 billion (20.9% mkt share) and Ocean RIG UDW (ORIG) at $1.7 billion (18.1% mkt share) with a combined backlog of $7.4 billion or a 77.6% mkt share – and are at risk of seeing their contracts terminated/amended lower due to current market conditions. We note that, Vantage Drilling (VTGDF) recently extended the Tungsten Explorer from $641k/day to an estimated $480k/day for 2-years.
We believe that the high risk of contract termination/amendment long-term impact to earnings are not manageable in this current weak market fundamental. As a result, we are lowering our price objective on ENSCO PLC to $12.00 from $16.00 per share.
Shares of Transocean have dropped 8.9% to $7.78 at 11:31 a.m. today, while Seadrill has declined 2.3% to $1.68, Ensco has tumbled 9.1% to $7.56, and Atwood Oceanics is off 8.7% to $5.97. Exxon Mobil has dipped 1.4% to $80.07.
"Then there was a woman, a lion of a woman."
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