) is 0.8% lower at $54.50 as analysts at Credit Suisse reiterate a
Neutral rating on the stock and raise the its price target to
Credit Suisse Says: "Cost Cutting and Rig Re-Contractings In
Focus, But Real Driver Is Next Weeks AGM; Raising Ests & TP to
$60 (from $56)"
"Increasing Target Price to $60 (from $56). We are increasing
our target price to account for the $300M initial cost cutting
initiative. We are raising our 2013/2014 EPS estimates to
$4.27/$5.58 (from $4.01/5.38).
"Sale Of Midwater Rigs? Beyond its legacy Jackups for sale (3
sold in Q1 and 4 remaining) management highlighted buyer interest
in some of its legacy mid-water fleet. RIG has 25 MW floaters (8
stacked). With midwater rates steady (strong in N. Sea) we could
see some PE or regional players step up to acquire some old gen
floaters. Beyond high grading the fleet - MW asset sales should
help drive RIGs broader cost cutting initiative.
"Solid Contract Renewals. The Jack Bates (4th Gen) was awarded a
90 day contract in Australia at $525K (previously $380k). While the
duration was a bit short - the dayrate was 20% higher than recent
Aussie fixtures. The midwater John Shaw (3rd Gen) was fixed forward
(1 Year contract) starting in 2015 in the UK at $415K. The
operators decision to fix forward the rig by almost two years at a
rate ~15% higher than the rig is set to earn in 2014 is indicative
of the tightness for MW rigs in the N. Sea.
"Managing the Balance Sheet. RIG has targeted a debt target of
$7-9B (currently $11B). Management plans to retire $1B in debt
through 2014 ($270M already paid) which should drop debt to capital
36% at the end of 2014. RIGs accelerated debt repayments should
drive cost savings of ~37M ($0.10/share) through 2014. We note net
debt to capital should rise to 33% by end of 2014 (28% currently)
due to $4.4B in CAPEX, $1.4B in dividends ($2.24 target), and $0.6B
in Macondo payments versus $5.3B in OCF."
RIG trades in a 52-week range of $39.32 - $59.50.
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