From Barron's Stocks to Watch Today:
The pressures on offshore drillers like Transocean (RIG), Atwood Oceanics (ATW), Noble (NE) and Diamond Offshore Drilling (DO) to pare their floater fleets continues unabated, note Cowen’s J.B. Lowe and Roland Morris. They explain:
Within the last six months, 32 floating rigs have been designated for retirement, including two just yesterday after the close
(Transocean’s Sedco 707 and GSF Aleutian Key). These are the first
floater retirements in over a decade (excluding several rigs that were
converted to non-drilling functions), and are the first steps in what we
expect will be a massive supply reduction over the next two years.
Given our outlook for floating rig demand through the end of 2016, we
believe that over 100 units should be removed from supply in order to
balance the market.
Additionally, we expect that much of the supply
addition over the next 21 months will be largely limited to newbuilds
that already have contracts. In other words, we expect a majority of
currently uncontracted newbuilds will have their deliveries pushed out
beyond 2016, as the rig owners wait for demand to perk back up in 2017
and beyond. Highlighting this trend was Atwood Oceanic’s announcement yesterday
that it may delay the deliveries of its last two uncontracted newbuilds
by up to a year, in addition to the six month delay already in effect…MORE
