NEW YORK (TheStreet) -- Shares of Transocean (RIG) are down 1.76% to $25.40 after the company's November fleet status report announced that the Deepwater Discovery, the Sedco Express and the GSF Arctic III rigs are now idle.
"We had been modeling that the Deepwater Discovery would see a 60-day gap in between contracts in West Africa but now that Transocean has removed the rig's scheduled survey from its 2015 guidance we are forecasting that the rig will be off rate for the entire first half of 2015," Cowen Group analysts said.
"Similarly with the Sedco Express we were calling for the rig to work half of 4Q14 with Eni SpA (E) in Nigeria before rolling onto a new contract at roughly $350 k/d. We now expect the rig will likely be idle for the first half of 2015 given that Transocean has removed plans for the rig's 5-year survey," analysts wrote.
The GSF Arctic III, which had been working in the U.K. North Sea is now idle as well, and analysts expect the rig will be "cold stacked" at the end of the year.
Oil's decline to a four-year low in recent months has caused companies to consider spending cuts, which would further reduce demand for rigs and the rates Transocean can charge to lease them to explorers, according to Bloomberg.
Separately, 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 several 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 and generally disappointing historical performance in the stock itself."
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 when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 506.0% when compared to the same quarter one year ago, falling from $546.00 million to -$2,217.00 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 52.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 513.51% 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.
- RIG, with its decline in revenue, underperformed when compared the industry average of 15.4%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- RIG's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.42 is sturdy.
- You can view the full analysis from the report here: RIG Ratings Report