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).

Frontline (Buy, TP: NOK280.00) - Front-row ticket to tanker potential

We believe the tanker fundamentals continue to look attractive, in particular for the VLCCs, with a highly manageable ~4% deliveries expected for 2025–2026. Further, we see potential positive catalysts in sanctions further restricting volumes transported on the dark fleet (possibly triggering scrapping postponed by shadow fleet deployment) and signs of a more aggressive volume strategy from OPEC+. Hence, we reiterate our BUY but have reduced out target price to NOK280 (295).

Heads-up for Q1 report 29 April

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...

Demand recovery continues to be delayed

Still our top pick of the international drillers

ENI capex cut but maintains shareholder returns

Driven by macro headwinds and uncertainty around trade tariffs, ENI was the first large oil company to introduce capex cuts for 2025, contributing to a more challenging business environment for oil services. Over the past five years, we estimate ENI to have been the oil major with strongest offshore spending growth, and it has been considered active and opportunistic while others have been more conservative. Hence, we see its reduction as a soft datapoint for oil services. ENI has optimised its ...

Another abrupt change

The US Trade Representative on 17 April published revised US port fees with significant changes to the initial proposal based on industry feedback. In its current form, the fees will primarily discourage use of Chinese-controlled maritime trade services to the US, and directly affect the use of Chinese-built vessels in US ports (with several considerable exemptions to avoid harm to US trade). The previous broader fees based on fleet composition and share of Chinese-built vessels has been scrappe...

Welcomed tender from Petrobras

Updates suggest Petrobras yesterday launched a new tender for “one or more” deepwater rigs for the Buzios field starting late-2026/early-2027. As it has been a while since the last Petrobras tender, and there has been uncertainty related to the timing of upcoming tenders, we believe a new Petrobras tender would offer relief for investors. As we count nine rigs already contracted with Petrobras to match the start-up window, we expect the requirement would be filled by rigs already in the country,...

Looking at required day-rates

Although there are several ongoing deepwater tenders, the lack of recent deepwater fixtures has created uncertainty among investors related to day-rates. Consequently, we have analysed the required day-rates to support current share prices and valuations. Given the high operating leverage and multiple variables involved (utilisation, lifetime and cost of capital), we estimate the sector requires 7G drillship day-rates from the mid-USD300k and above to support the current share prices.

Trade war will hurt demand

E&P spending sensitivity explored

With an oil price at the mid-USD60s/bbl level, focus on the oil major overspending situation, and resulting impact on the outlook for offshore-focused oil services, is set to increase further. While oil companies would likely cut, or even eliminate, buyback programmes first, we expect increased focus on spending reductions and efficiencies, creating a more challenging business environment for oil services. Hence, we see a risk of oil companies taking a more cautious approach, resulting in projec...

Norsk Hydro (Sell, TP: NOK55.00) - Aluminium defying fundamentals

We reiterate our SELL and NOK55 target price, as we believe consensus EPS and aluminium price expectations are too high. We have seen aluminium prices outperform coal prices by 40% since the summer, defying the fundamental relationship where aluminium prices have been set by its cost of production for the past 15 years. We do not believe a balanced global supply/demand situation is likely to break this correlation. We have reduced our 2026–2027e EPS by 3% due to a stronger NOK versus USD. We est...

Pemex seeks national partnerships to accelerate developments

In line with its earlier communication about Pemex looking for partners to re-start drilling activities and fight oil production decline, local news reports suggest that Pemex is seeking partnerships for 17 blocks (11 offshore and six onshore) to secure external capital. It is mostly considering local partners and intends to take the role as operator in most of the blocks. At first glance, the expected volume from the partnerships looks to be small, with only 66kbd to be added by year-end 2025. ...

Valuation and market update

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