Drop in rating: for Houston-based Transocean
Transocean downgraded on market woes
Analysts at investment bank Dahlman & Rose today moved shares in drilling company Transocean from ‘buy’ to ‘hold’ in light of current activity within the commodities and financial markets, despite steady dayrates on drilling rigs, a move that could be experienced by other major players in the industry.
“We believe the latest drops in oil prices will have an impact on management’s decision-making during the next few months—especially as it relates to the special dividend,” said the bank in a statement.
“We expect a more cautious approach from the company with respect to its cash balances and future debt requirements.”
The bank said that despite dayrates remaining steady, the drop in its recommendation came due to concerns over the swings in the oil price and less availability of financing, from both the equity and debt markets.
“We believe there is too much focus on the viability of field projects at certain oil price levels, and at current levels nearly all field projects are profitable¿ however the industry is faced with lower cash flows to pay for these projects in the current declining oil environment,” said the statement.
“We expect Transocean and other drilling contractors to continue seeing limited support until further clarity arises from the oil markets and more importantly the credit markets,” added the statement.