Strategic, defensive and expensive
Strategic, defensive and expensiveWe welcome Transocean’s efforts to consolidate the harsh environment space and extract synergies, but still struggle with the overall economics of the Songa deal. We consider the transaction accretive on near-term EV and credit multiples, but highly dilutive for asset values. To justify the implied value paid per rig, we estimate long-term dayrates for harsh semis of around USD450k are needed, roughly double the current level. As the rigs each have 12-year options with maximum average dayrates of USD430k–440k, we struggle to quantify the upside potential, but see downside risk in a weak market. Having reduced our NAV for the deal, we have trimmed our target price to USD7.5 (USD8.0) and reiterate our SELL recommendation.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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