NEW YORK (TheStreet) -- Shares of Transocean(RIG) - Get Report were gaining 4.5% to $12.52 Tuesday as oil prices were rebounding from recent losses on expectations that the recent slowdown in U.S. oil production will accelerate.
WTI crude oil for November delivery was up 1.67% to $45.17 a barrel Tuesday morning, and Brent crude oil for November delivery was up 1.73% to $48.16 a barrel.
In a note to investors, analyst firm Deutsche Bank said that "revised supply estimates that non-OPEC supply will contract next year for the first time since 2008."
Deutsche Bank analysts said they expect the oil market to "remain oversupplied in 2016" despite an anticipated contraction from non-OPEC countries. The analyst firm expects the oil market will continue to be oversupplied by about 1 million barrels a day in the first half of 2016, falling to a deficit of 310,000 barrels a day in the second half of the year.
OPEC members and other major oil producers such as Russia are still expected to produce oil at high levels, according to the Wall Street Journal.
Last week Transocean was linked to Petrobras'(PBR) - Get Reportongoing corruption probe. The company denied any involvement in the alleged pay-to-play scheme known as Carwash, saying, "Transocean has not identified any wrongdoing by any employee or any of its agents in connection with the company`s business."
TheStreet Ratings team rates TRANSOCEAN LTD as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate TRANSOCEAN LTD (RIG) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Energy Equipment & Services industry. The net income has significantly decreased by 41.7% when compared to the same quarter one year ago, falling from $587.00 million to $342.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 42.94% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- TRANSOCEAN LTD's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TRANSOCEAN LTD swung to a loss, reporting -$5.25 versus $3.85 in the prior year. This year, the market expects an improvement in earnings ($3.38 versus -$5.25).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 22.5%. Since the same quarter one year prior, revenues fell by 19.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: RIG