Noble Corporation (NE)

[eFinanceMarkets]

Offshore drillers weighed by competition, range-bound oil prices, Zephirin says

Shares of offshore drilling contractors powered higher today as crude oil prices rose sharply: NE +8.1%, RDC +7.9%, ESV +6%, DO +5.9%, RIG +5.3%, ATW +4.8%.

But all have dropped 30%-45% YTD amid weakening oil prices, and it's still not time to buy the offshore drillers, according to Zephirin Group's Longdley Zephirin, who maintains his Neutral outlook on the group.

The companies will need to continue to exercise strong cost control and building liquidity as they navigate weak demand, falling backlogs, dayrates and utilization rates, and Zephirin thinks it will take time for the group to adjust to falling ultra-deepwater dayrates in response to weaker demand in H2 2017.

As a result, the firm lowers its price targets for RIG to $14 from $16, RDC to $14 from $15, DO to $16 from $18, ESV to $8.50 from $11 and NE to $5 from $6.50.