Thursday, November 4, 2010

Transocean (NYSE:RIG) Facing Near-Term Challenges

JPMorgan (NYSE:JPM) and Wedbush maintained their ratings on Transocean (NYSE:RIG), but both see in the near term that they have challenges which will weigh on the stock.

"We believe this discount is warranted given 1) the medium-term view for lower offshore dayrates across all asset class, 2) costs will likely rise with greater safety requirements and more frequent maintenance, and 3) that liability from the Macondo incident remains highly uncertain," said JPMorgan.

Wedbush said, "Despite significant upside to our target price, we are maintaining our HOLD rating on RIG as overhang from current GOM offshore drilling moratorium persists. With a premium fleet, strong secular growth in deepwater and primarily oil leverage, we would expect RIG to rise in absolute terms. Given the defensive nature of its backlog in what has become a market increasingly seeking a return to risk, however, we would not expect RIG to outperform more operationally leveraged jackup names in the near-term."

JPMorgan maintained an "Underweight" on Transocean, while Wedbush kept a "Hold" on them.

Transocean closed Wednesday at $63.96, gaining $0.36, or 0.57 percent. Wedbush has a hefty price target of $97 on the shares of the company, JPMorgan is far below that at $55 a share.

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