Transocean LTD (NYSE:RIG) Has Further Downside Risks

Transocean LTD (NYSE:RIG) Has Further Downside Risks


Transocean LTD (NYSE:RIG) is trading more than 2.5 percent on Monday following the disclosure that the company has struck a deal to divest 15 rigs for about $1.35 billion. S&P Capital IQ analyst Glickman has maintained its Sell rating while keeping the target price of $11 on the stock. This suggested that the stock presents further downside risks.

Privately-held Norwegian company, Borr Drilling, disclosed that it would Transocean’s jackup fleet consisting of ten existing units and five fresh builds. The brokerage pointed out that consideration included pending newbuild milestone payments, which would be largely in 2020.

Currently, Glickman expects a valuation of approximately $790 million for those payments. This implied estimated cash proceeds of $560 million.

In a research note to clients, the analyst viewed, “. We think Borr is acquiring the units for well below new construction cost, and we estimate cash proceeds could retire 7% of RIG’s long-term debt. Strategically we dislike the deal, as it boosts RIG’s exposure to deepwater, which we see as weak through ’18.”

During the 52-week period, the stock hit a high of $16.66 and a low of $8.34. During the day, the stock’s high is $12.28 while the low is $11.81. At time of writing this, the stock fell 2.37 percent.