In the fleet update Ocean Rig CEO George Economou said the oil market "continues to remain challenging due to the massive spending cuts initiated by the oil companies."
The CEO continued, "For rigs that we cannot secure long-term employment that are coming up for their 5-year SPS we will cold stack the units and in the case of the semisubmersible rigs seriously consider all our options including disposal or scrapping."
Ocean Rig said it received notice of material breach for its drillship Ocean Rig Mylos in Brazil that could result in a termination within 75 days.
The company also said the Ocean Rig Olympia successfully started its new contract in Angola on August 15, that the Ocean Rig Skyros started its six-year contract in the country on October 1.
TheStreet Ratings team rates OCEAN RIG UDW INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate OCEAN RIG UDW INC (ORIG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Energy Equipment & Services industry average. The net income increased by 7.6% when compared to the same quarter one year prior, going from $69.59 million to $74.87 million.
- Even though the current debt-to-equity ratio is 1.42, it is still below the industry average, suggesting that this level of debt is acceptable within the Energy Equipment & Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.89 is very high and demonstrates very strong liquidity.
- OCEAN RIG UDW INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, OCEAN RIG UDW INC increased its bottom line by earning $1.97 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 3.5% in earnings ($1.90 versus $1.97).
- ORIG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 86.83%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: ORIG