Better across the board

Q1 slightly better than expected

Needs to lock in 2026

Offshore Drilling (DNB Markets) (, ) - (39 pages)

Seadrill (Buy, TP: USD35.00) - Countdown to 2027

Despite a tough deepwater market, on our estimates, Seadrill is trading at a c4x EV/EBITDA for 2025–2026e, falling to 2.8x for 2027e (with our 2026–2027e EBITDA 21–23% below consensus). We see limited cash flow yield potential near-term, rising to c15% for 2027e. Tier-2 rig challenges have been a key investor concern, and while we model only a small contribution from these rigs (7–5% of our 2026–2027e EBITDA). We estimate c50% upside potential on asset values even in a scenario where we assign z...

Well positioned for increased contract activity

Valaris (Buy, TP: USD40.00) - 2027 confidence building

With ARO Drilling extensions and two West Africa jobs (DS-10 and DS-15), Valaris is progressing well in building visibility for 2027, the first year set to have proper earnings as 2025–2026e will likely be affected by rig market challenges and idle time. On top of the recently announced drillship jobs, Valaris seems well placed to build additional backlog in Nigeria and Egypt, for deepwater opportunities with startup in 2026/27. In sum, we believe its cash flow story remains on the horizon, whil...

Energy Morning - 6 May 2025

Energy Morning - 5 May 2025

Noble's Shell contracts a small negative

Energy Morning - 2 May 2025

Dolphin Drilling (Sell, TP: NOK0.20) - Equity meltdown in action

After its stock was suspended from trading since mid-Monday, Dolphin Drilling released a statement related to what appears to be an unsuccessful refinancing effort. In a scenario with an unfavourable ruling on the UK tax claim, we see a total capital need of cUSD70m–75m through 2026e, of which we believe cUSD50m–55m should be fresh equity, assuming the shareholder loan is converted/extended. For 2027e, further capital is likely to be required for the Blackford 5-year survey. Based on the combina...

Transocean (Buy, TP: USD3.00) - Patience, powered by backlog

Transocean remains disciplined in its bidding strategy by leveraging its strong contract coverage, making it less willing to lower dayrates than peers in ongoing tenders, as it can afford to be patient. Short-term, this could limit its near-term backlog growth, as it recently had two rigs replaced in the US Gulf. Long-term, we expect it to keep high-quality rigs working, and benefit from its service offering and client relationships. We reiterate our BUY and USD3 target price.

Noble (Buy, TP: USD30.00) - A more balanced portfolio

Noble secured key contract wins for four deepwater rigs with Shell (US Gulf) and Total (Suriname) with a meaningful bonus component. Having incorporated these contracts and expected idle time and contract preparation, our 2026–2027e are largely unchanged, despite the contracts being considered solid. Also, the jobs provide it with better backlog visibility and a more diversified backlog with respect to clients and pricing (fixed versus market-linked), which we believe investors will like. We rei...

Valaris (Buy, TP: USD40.00) - All roads lead to 2027

With recent energy markets uncertainty and 2025–2026 rig market challenges remaining, idle time and gaps between contracts have left near-term earnings looking uninspiring. On the positive side, we see the company as well placed for several deepwater jobs with startup in 2026e, which could help build visibility for 2027. Hence, its cash flow story remains on the horizon, while we consider earnings improvements key to closing the NAV gap and for intrinsic values to crystallise. We reiterate our B...

Another round of Aramco suspensions expected

Market sources suggest Saudi Aramco will further reduce its rig count in the coming months through early contract terminations and potentially more suspensions, which would mark the ‘fourth round’ of rig reductions. This follows last month’s request for dayrate discussions (historically, such requests have preceded it suspending rigs). We believe this round could be extensive, affecting c10 jackups out of its current rig count of c57 rigs. At the peak, Aramco had 92 jackups (22% of global demand...

Energy Morning - 29 April 2025

Transocean (Buy, TP: USD3.00) - Navigating with a strong backlog

We expect Q1 EBITDA of USD219m, in line with the guidance and consensus. With strong backlog coverage for 2025–2026e, we believe Transocean is less likely to lower dayrates than peers in ongoing tenders, although that could limit near-term backlog growth. We also expect an update on cost-saving initiatives with the results, with upside risk to our 2026–2027 estimates, but are 11–25% below consensus on EBITDA. We reiterate our BUY, but have cut our target price to USD3 (4).

Noble (Buy, TP: USD30.00) - Sailing ahead, but wind is shifting

Despite general uncertainty in the energy markets and dayrates under pressure, our Q1e adj. EBITDA is 7% above consensus and we expect the 2025 guidance to be reiterated. We find Noble well placed to add deepwater backlog, leading to a more balanced portfolio of priced and market-linked contracts. We reiterate our BUY but have cut our target price to USD30 (35), supported by NAV, while we find it fully valued on cash flow metrics.

Muted 2025 growth expectations

Following Q1 earnings calls by some of the oil service companies, 2025 outlooks appear more challenging than previously. Baker Hughes expects international upstream spending to decline by mid- to high-single digits, while Halliburton sees its international revenues flat to slightly down. Furthermore, Weatherford expects 2025 international revenue to decline by low double- to mid-double digits. Precision Drilling flagged additional rig suspensions by Saudi Aramco, and SLB highlighted a slow start...