Deutsche Bank Downgrades Drillers
You could say Deutsche Bank analyst Mike Urban was swimming against the tide, after he downgraded several offshore drillers and said investors may be too focused on deepwater rigs and ignoring the risks in the shallow-water rigs those companies also operate.
Urban changed his ratings on Ensco International and Transocean to “Sell” from “Hold” and also downgraded Diamond Offshore, Hercules Offshore, Noble Corp., Pride International and Rowan Cos.
Most analysts think demand will outpace supply of deepwater rigs for years to come, and rates will remain high or rise. Rates for some of those rigs range up to $500,000 per day or more. Demand is not as strong for shallow-water jackup rigs, for which dayrates run about half or less than those of deepwater rigs and are not expected to increase much, if at all, in the next few years.
Urban points out that jackup rigs make up a significant part of the drillers’ fleets and account for a good portion of earnings. Investors, he believes, ignore that reality at their peril.
Shares of Ensco International fell $1.71, or 2.6 percent, to close at $65. Transocean lost $2.59, to $149.30. Diamond Offshore, Hercules, Noble Corp., Pride and Rowan lost ground as well.
