Analyst Actions: Transocean Target Raised $4 at Credit Suisse - Shares Slip 1%
Transocean ( RIG ) 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 $60.
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.