Opinions Gordon Reid
Transocean Inc.RIGDON'T BUYAug 20, 2014
Stock price when the opinion was issued
As of Jun 04, 2026. Market Open.
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Good free cash flow, valuation and contracts that generate revenue.
Jim Lebenthal
They reported earnings last night: cash flow and debt were lower than expected. They're merging with Valaris.
Jim LebenthalLargest in the space. Only company that didn't go bankrupt during Covid, but now has a bit more debt than peers (though it's manageable). JPM downgraded it today on worries about Petrobras exposure.
He took profits, but would look to re-enter (not today, but likely lower). Demand will grow for next several decades. Biggest bear in the world (the IEA) just pivoted on peak demand. US shale growth is over, so where is oil going to come from? Macro's very good, but we just have to get through the next 3-6 months. Of all the names in services, the one he's most inclined to own.
11 of their cold-stacked rigs have been mothballed for a while but will return to operation soon.
Jim LebenthalThe day rates on these offshore drilling rigs has been climbing well, so idle rigs will return to service. Is up sharply this month.
Jim LebenthalThey report later today, but he's not interest in that, but rather the conference call about how tight the market is for deep-drilling rigs. He thinks it's a matter of when, not if, their rigs will be reactivated.
Jim LebenthalHigh debt, which they are paying down from free cashflow. Rig counts are up, a big milestone. Super-duper, high beta name to own when oil's not falling 5% in a day. Be strategic when to add. 12-ish% free cashflow yield, but see his Top Picks for a more compelling name.
Eric NuttallGiven the high spot price of oil now, you need to go to a high-beta oil name to capture a return.
Joe Terranova
Pete Najarian
When looking at drillers, you have to ask about utilization rates. You also have to look at day rates, how much they’re getting for their rigs. The whole industry has been in a bit of a downward trend and he thinks it has gone too far. It is sort of built on the fact that it is very, very costly to do offshore drilling and we have greater and greater opportunities for energy recovery on land based facilities. There will be an opportunity for these companies. His favourite is Ensco (ESV-N), which has the youngest fleet. Also, they made a very strategic buy of Pride at the depths of the last cycle. Because they have the youngest fleet, the utilization rates tend to be higher because they are not in dry dock for repairs as often. Trades at about 10X. Pays a 5.9% dividend.