Post by redbullnvodka on Apr 8, 2024 7:12:37 GMT -5
Susquehanna upgrades Transocean stock on offshore drilling demand recovery
Investing.com Editor Emilio Ghigini - Published 04/08/2024, 07:17 AM
www.investing.com/news/company-news/susquehanna-upgrades-transocean-stock-on-offshore-drilling-demand-recovery-93CH-3369178
On Monday, Transocean (NYSE:RIG) stock received an upgrade from Susquehanna, shifting from a Neutral to a Positive rating, with a new price target set at $9.00. The change reflects a positive outlook on the offshore, ultra-deepwater drilling sector, which is seen to be in a demand recovery cycle. This recovery is driven by favorable crude oil prices and the economics of offshore drilling.
The upgrade is based on several key factors, including the limited supply of sixth- and seventh-generation drillships, capital constraints, and the extended lead times required for constructing new vessels. These elements are anticipated to maintain a tight supply in the ultra-deepwater market, which is expected to support an increase in dayrates.
Transocean, owning eight of the thirteen cold-stacked sixth- and seventh-generation ultra-deepwater rigs currently in the market, may find additional EBITDA opportunities if conditions favor reactivating these rigs.
Furthermore, the industry is witnessing a trend of longer contract durations for harsh-environment and ultra-deepwater drilling, reminiscent of the levels seen in 2013-2014. The lead times for contract awards have also lengthened. This trend, coupled with a substantial backlog of approximately $9 billion, provides Transocean with high EBITDA visibility extending through 2025. The firm also has potential to re-contract its rigs at higher dayrates as the market evolves.
The analyst's commentary underscores the strategic advantages that Transocean holds in the current market landscape. With the backlog securing a stable financial outlook, and the possibility of re-contracting at improved rates, the company appears well-positioned to capitalize on the current industry dynamics.
InvestingPro Insights
As Transocean (NYSE:RIG) garners a positive outlook from Susquehanna, real-time data and insights from InvestingPro provide additional context for investors. With a market capitalization of approximately $5.41 billion, the company operates with a significant debt burden, which is crucial for investors to consider when evaluating the risk profile of their investment. Despite a challenging past year, with analysts not expecting profitability this year, Transocean's liquid assets do exceed its short-term obligations, indicating some level of short-term financial resilience.
Investors should note that Transocean's stock has shown strong returns over the last month, with a 24.38% price total return, reflecting investor optimism potentially tied to the sector's recovery. However, with three analysts having revised their earnings downwards for the upcoming period, caution may be warranted. Furthermore, the company's RSI suggests the stock is currently in overbought territory, which could indicate a pullback in the near future.
An InvestingPro Tip highlights that Transocean does not pay a dividend to shareholders, which may influence the investment decisions of income-focused investors. For those seeking more comprehensive analysis, InvestingPro offers additional tips on Transocean. Investors can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to these valuable insights. Currently, there are 6 more InvestingPro Tips available for Transocean, which could further inform investment strategies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Investing.com Editor Emilio Ghigini - Published 04/08/2024, 07:17 AM
www.investing.com/news/company-news/susquehanna-upgrades-transocean-stock-on-offshore-drilling-demand-recovery-93CH-3369178
On Monday, Transocean (NYSE:RIG) stock received an upgrade from Susquehanna, shifting from a Neutral to a Positive rating, with a new price target set at $9.00. The change reflects a positive outlook on the offshore, ultra-deepwater drilling sector, which is seen to be in a demand recovery cycle. This recovery is driven by favorable crude oil prices and the economics of offshore drilling.
The upgrade is based on several key factors, including the limited supply of sixth- and seventh-generation drillships, capital constraints, and the extended lead times required for constructing new vessels. These elements are anticipated to maintain a tight supply in the ultra-deepwater market, which is expected to support an increase in dayrates.
Transocean, owning eight of the thirteen cold-stacked sixth- and seventh-generation ultra-deepwater rigs currently in the market, may find additional EBITDA opportunities if conditions favor reactivating these rigs.
Furthermore, the industry is witnessing a trend of longer contract durations for harsh-environment and ultra-deepwater drilling, reminiscent of the levels seen in 2013-2014. The lead times for contract awards have also lengthened. This trend, coupled with a substantial backlog of approximately $9 billion, provides Transocean with high EBITDA visibility extending through 2025. The firm also has potential to re-contract its rigs at higher dayrates as the market evolves.
The analyst's commentary underscores the strategic advantages that Transocean holds in the current market landscape. With the backlog securing a stable financial outlook, and the possibility of re-contracting at improved rates, the company appears well-positioned to capitalize on the current industry dynamics.
InvestingPro Insights
As Transocean (NYSE:RIG) garners a positive outlook from Susquehanna, real-time data and insights from InvestingPro provide additional context for investors. With a market capitalization of approximately $5.41 billion, the company operates with a significant debt burden, which is crucial for investors to consider when evaluating the risk profile of their investment. Despite a challenging past year, with analysts not expecting profitability this year, Transocean's liquid assets do exceed its short-term obligations, indicating some level of short-term financial resilience.
Investors should note that Transocean's stock has shown strong returns over the last month, with a 24.38% price total return, reflecting investor optimism potentially tied to the sector's recovery. However, with three analysts having revised their earnings downwards for the upcoming period, caution may be warranted. Furthermore, the company's RSI suggests the stock is currently in overbought territory, which could indicate a pullback in the near future.
An InvestingPro Tip highlights that Transocean does not pay a dividend to shareholders, which may influence the investment decisions of income-focused investors. For those seeking more comprehensive analysis, InvestingPro offers additional tips on Transocean. Investors can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to these valuable insights. Currently, there are 6 more InvestingPro Tips available for Transocean, which could further inform investment strategies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.