Well-positioned for demand recovery

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Energy Morning - 18 February 2025

Q4 numbers as expected

Solid earnings visibility at 15-23% FCFE yield

Transocean (Buy, TP: USD4.00) - Contract coverage gives optionality

In an uncertain deepwater market, Transocean provides investors with more time optionality, as we believe it is better positioned than peers for the coming years. This is due to its high-quality fleet and service offering, backlog coverage (77% of our estimated EBITDA covered in 2025–2027), and solid commercial capabilities. Due to these factors and less downside risk to consensus than peers (we are 8–14% below on 2026–2027e EBITDA), we believe it deserves a premium valuation. We reiterate our B...

Odfjell Technology (Buy, TP: NOK70.00) - Looking for H2 2025 growth

While the stock is attractively valued, we believe the company must create confidence in future growth and bring capex back to normalised levels for the investment case and upside potential to fully unfold. Management was optimistic that the activity uptick and cost cutting will progress in late 2025, helping H2 EBITDA. We see further growth for 2026e from its recently announced powered drill pipe contract. We estimate an equity cash flow yield potential of c12% in 2025, increasing to 17% in 202...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Odfjell Technology (Buy, TP: NOK70.00) - Earnings growth conviction ne...

Given some Well Services’ setbacks in 2024 (set to affect 2025), including less wired drillpipe work, we believe restoring investor confidence in earnings growth is key. We remain c10% below consensus on 2025–2026e group EBITDA, but find the valuation attractive at a 2026e EV/EBITDA of 2.2x. With recent refinancing allowing for dividend flexibility, we forecast flat dividends for 2025–2026, equal to a dividend yield of c13%. We reiterate our BUY and NOK70 target price.

Too early to buy the market recovery

Leading from the front

Offshore spending plateauing

After reviewing major oil companies’ most recent spending plans, we estimate offshore spending growth of c3% YOY in 2025 (down from c5% late last year and c8% six months ago). We believe a combination of supply-chain bottlenecks, efficiency gains, and capital discipline among oil companies are the main reasons for spending growth fading, resulting in a mid-cycle plateau. On the flip side, the cycle keeps building duration, as we see investments being pushed into 2026–2027. Also, activity levels ...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Retirement cycle started, but more needed

On one hand, it is positive to see Noble take action to balance the market, with plans to retire two cold-stacked drillships. However, as both had been cold-stacked for some time (10 and seven years) and were not considered actively chasing new contracts, the impact mostly relates to the signal sent rather than helping actual supply/demand. We continue to believe more retirements (including recently active rigs) are required, but consider Noble’s move today a good start. In our opinion, investor...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Slow start to 2025 for offshore, but cycle duration highlighted

SLB said on its recent Q4 earnings call that it expects flat global upstream spending YOY in 2025, while Halliburton guided for flat group revenue. Both expect offshore activity to improve as the year progresses, based on numerous FIDs late-2025 and into 2026 – but implying a slow start to the year. These comments mirror feedback we have had from industry sources, although we are already seeing offshore drilling campaigns slipping towards the end of 2026, or even into 2027. Hence, their comments...