Deep Sea Drilling Sector : Sector declines along with growing competition

Morgan Stanley has looked at the sector and sites the likely decline of rates as a reason to be more conservative about the sector. $ 100 oil is not a sufficient offset to the new rigs competing in the same markets.

The future looks OK, the present not so much, Morgan Stanley says

  • Bearish talk about offshore drillers has abounded recently (IIIIIIIV), and Atwood Oceanics (ATWlatest quarterly results won’t ease those concerns, Morgan Stanley says.
  • The firm is now modeling a rollover at $400K/day on ATW’s next rig to rollover in Equatorial Guinea in Aug. 2014, down substantially from the rig’s current dayrate of $516K/day (fixed in July 2013), as it sees increased competition in securing new work.
  • ATW does remain positioned to deliver steady earnings growth, the firm says, and beyond well-documented near-term floater market choppiness it still forecasts marketed utilization to pick up in 2015.
  • ATW (-2.1%) results pulled down other offshore players: HERO -7.9%DO-3.2%NE -2%RIG -1.9%SDRL -1.8%ESV -1.6%RDC -0.9%.

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