The slide down the slippery slope continues unchecked...where is the bottom?

makes one wonder now…

[B]Idled rigs hinder Transocean’s 2015 earnings[/B]

NOVEMBER 19, 2014—Equity research firm Cowen and Company says publicly traded offshore drilling contractor Transocean’s November Fleet Update Summary has “negative implications for the stock.”

Traded on the New York Stock Exchange under the symbol “RIG,” shares of Transocean were trading at $25.85 as of the close on November 18. Cowen and Company analysts J.F. Lowe and Roland Morris reiterated a “Market Perform” rating on the stock and set a target price of $27 per share.

In its Fleet Update Summary, Transocean reported that the ultra-deepwater floaters Deepwater Discovery and Sedco Express, and the midwater floater GSF Arctic III, are idle. Cowen and Company says Transocean could “see a wave of additional ready stackings if it doesn’t start signing contracts soon.”

Cowen and Company says it had been modeling that the Deepwater Discovery would see a 60-day gap in between contracts in West Africa, but now that Transocean has removed the rig’s scheduled survey from its 2015 guidance, it is forecasting that the rig will be off rate for the entire first half of 2015.

Similarly with the Sedco Express, Cowen and Company was calling for the rig to work half of fourth quarter of 2014 with ENI in Nigeria before rolling onto a new contract at roughly $350,000 per day. It now expects the rig will likely be idle for the first half of 2015 given that Transocean has removed plans for the rig’s five-year survey. The GSF Arctic III, which had been working in the U.K. North Sea, is now idle as well and Cowen and Company expects the rig will be cold stacked at the end of the year.

[B]In its Fleet Update Summary, Transocean reports that the Discoverer Enterprise was awarded a one-well contract extension in the U.S. Gulf of Mexico at a day rate of $399,000 ($32 million estimated backlog). The rig’s prior day rate was $615,000[/B].

The GSF Galaxy III was awarded a four-month contract as an accommodation unit in Denmark at a day rate of $175,000 ($23 million estimated backlog). The rig’s prior day rate was $160,000.

The Cajun Express was awarded a one-well contract extension in Senegal at a day rate of $487,000 ($15 million estimated backlog). The rig’s prior day rate was $596,000.

As for the Discoverer Seven Seas, the customer exercised a one-well option at an undisclosed location at a day rate of $400,000 ($13 million estimated contract backlog). The rig’s prior day rate was $400,000.

Cowen and Company says it is maintaining a 2014 earnings estimate of $4.45 per share. In 2015, however, it is lowering its estimate to $2.40 per share from $2.50 per share as it has “added additional downtime on newly idled UDW floaters in first half of 2015. We are maintaining our 2016 earnings estimate of $1.60 per share. We reiterate our Market Perform rating and $27 price target which is based on an 8.0x EV/EBITDA multiple on our 2016 EBITDA estimate.”

DISCOVERER ENTERPRISE down to $399k/day from $615k…OUCH, that’s gonna leave a mark!

Why can’t the Arctic III work in Alaska? Who’s to say the other drillers aren’t offering low rates to get their new deliveries working? Are all the rigs taking pay cuts listed older units or are they newer models?

[QUOTE=Fraqrat;148315]Why can’t the Arctic III work in Alaska? Who’s to say the other drillers aren’t offering low rates to get their new deliveries working? Are all the rigs taking pay cuts listed older units or are they newer models?[/QUOTE]

I would imaging everyone is taking a severe haircut when signing up equipment now even newbuildings which luckily for the drillers are just about all built and delivered. Why so many companies built so many drillships is something I never could understand. I mean did no one at all calculate for a downturn in the price of a barrel of oil and what that would do to dayrates?

The thing about the older equipment is that it is all paid for and just needs to be maintained. DISCOVERER ENTERPRISE is now 16 years old so is fully amortized so I imagine that it can operate at the lower dayrate and still be profitable but a brandnew ship not fully paid off can’t work at $400k/day and generate much, if any, ROI. Just the interest on a $600M ship at 6% is almost $30M a year or $80k/day!

I guess the question to answer is who has the most rigs and ships nearing the ends of their charters and if a 33% haircut is expected, it will not be hard to determine how profits will be effected? If a company is going to see much lower cashflow, then they’d better be in a good cash position to weather the storm ahead. Even before the slide down in oil prices, the majors all were talking seriously about reducing their E&P spending so I can well imagine that now their shareholders are screaming loud and scared.

This is only talking about the drillers, there has got to be blowback towards all the service providers as well? Are OSV dayrates following drillships?

[QUOTE=c.captain;148323]The thing about the older equipment is that it is all paid for and just needs to be maintained. DISCOVERER ENTERPRISE is now 16 years old [/QUOTE]

I couldn’t believe the Discoverer Seven Seas is still going … I worked on that thing off west Africa, the Med, Adriatic, and finally off Newfoundland and Labrador in my youth.

[QUOTE=Steamer;148326]I couldn’t believe the Discoverer Seven Seas is still going … I worked on that thing off west Africa, the Med, Adriatic, and finally off Newfoundland and Labrador in my youth.[/QUOTE]

no question DSS needs retirement…ships cannot sail forever and her day is at hand