24/7 Wall St. » RIG

Media Digest (1/27/2012) Reuters, WSJ, NYT, FT, Bloomberg

247wallst — Fri, 27 Jan 2012 11:36:39 +0000

Greece and its creditors are close to a deal on the nation’s debt swap. (Reuters)

A judge rules that some of the Gulf spill costs to be covered by Transocean (NYSE: RIG) will be covered by BP (NYSE: BP) instead. (Reuters)

Samsung had record profits on smartphone sales and will increase capex by $22 billion. (Reuters)

An accounting change at Ford (NYSE: F) will change its profits. (Reuters)

Apple (NASDAQ: AAPL) overtook Samsung as the largest smartphone company in the world. (Reuters)

Wellpoint (NYSE: WLP) will change how it pays primary doctors on the theory that early care will prevent expensive diseases. (WSJ)

Executives at bankrupt firms continue to get large bonuses. (WSJ)

European officials say adoption of the Volcker Rule will keep banks from buying sovereign debt. (WSJ)

Investors move out of cotton, copper and crude oil. (WSJ)

Twitter will use the ability to censor tweets to move into some countries where it is blocked. (WSJ)

AT&T (NYSE: T) has fallen behind Verizon (NYSE: VZ) in cellphone sales. (WSJ)

EU leaders expect the size of a bailout fund to rise. (WSJ)

Nokia (NYSE: NOK) says its new smartphones are selling well. (WSJ)

Businesses increase spending as they move into 2012. (WSJ)

Large central banks will continue to use their balance sheets to help national economies. (WSJ)

Starbucks (NASDAQ: SBUX) earnings move higher. (WSJ)

A WPP Group survey shows that consumers rank the performance of global brands higher than they do the moral qualities of the companies that own them. (WSJ)

EU banks that have taken money from the European Central Bank can either keep the money to help their balance sheets or use it to buy risky sovereign debt as a way to stabilize the financials of the region. (WSJ)

IMF studies of the Greek economy show that it is falling apart rapidly. (NYT)

Washington support for wind and solar energy is dropping. (NYT)

The largest hedge fund, Bridgewater Associates, once again turns in strong gains. (NYT)

The Defense Department to cut $485 billion over the next 10 years. (FT)

Large U.S. industrial firms expect sharp growth. (FT)

JP Morgan Chase (NYSE: JPM), which considered leaving the most economically damaged markets in Europe, decides to stay, to some extent, for social reasons. (FT)

BNP Paribas will sell its $11 billion energy loan portfolio. (FT)

Investors continue to pressure Apple to begin to pay a dividend out of its $100 billion in cash. (FT)

CDS numbers show increases in the risk of corporate and sovereign paper. (Bloomberg)

Spain’s unemployment reaches 22.9%. (Bloomberg)

As the economy worsens in Europe, General Motors (NYSE: GM) steps up its attempts to restructure Opel. (Bloomberg)

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Press Digest Tagged: AAPL, BP, F, GM, JPM, NOK, RIG, SBUX, T, VZ, WLP

Shell, Transocean Stop Leak in Gulf of Mexico Well (RDS-A, RIG, BP)

Paul Ausick — Tue, 20 Dec 2011 17:46:43 +0000

A small leak in a line feeding drilling fluid to a well owned and operated by Royal Dutch Shell (NYSE: RDS-A) and using a rig owned by Transocean Ltd. (NYSE: RIG) has spilled less than 6,000 gallons of drilling fluid into the Gulf of Mexico. The leak was reported on Sunday night and the well was shut down on Monday.

The well is located in the Mississippi Canyon area of the Gulf, about 20 miles from the location of the Macondo well, where a Transocean rig exploded in April 2010, killing 11 workers and spilling 5 million barrels of oil from a well owned by BP plc (NYSE: BP).

The recent accident is reportedly far less severe. The original report indicated that 319 barrels (about 13,400 gallons) of drilling fluid escaped. MarketWatch reports that Shell now says that 7,560 gallons of oil and 5,829 gallons of drilling fluid leaked into the Gulf.

Federal regulators have approved Shell’s clean-up plan which will include disconnecting the drilling fluid line from the well’s blowout preventer. There is no estimate of how long the well will be shut-in.

Paul Ausick

Filed under: Oil & Gas Tagged: BP, RDS-A, RIG

Media Digest (12/15/2011) Reuters, WSJ, NYTimes, FT

247wallst — Thu, 15 Dec 2011 09:35:53 +0000

Olympus may hire its former CEO, Michael Woodford, in the midst of an accounting scandal. (Reuters)

Foreign investment in China drops for the first time in 28 months. (Reuters)

Holiday sales continue to tick higher, according to the National Retail Federation. (Reuters)

Sony (NYSE: SNE) confirms its 2011 and 2012 targets for PS3 sales. (Reuters)

Amazon.com (NASDAQ: AMZN) shares lose 2011 gains because of concerns about margins. (Reuters)

Lam Research (NASDAQ: LRCX) to buy Novellus Systems (NASDAQ: NVLS) for $3.3 billion. (Reuters)

The SEC will try to appeal a federal ruling that blocked a settlement with Citigroup (NYSE: C) over toxic mortgage debt. (WSJ)

Wage increases in China cause the costs of its exports to the U.S. to rise. (WSJ)

Research In Motion (NASDAQ: RIMM) is under pressure to replace senior management. (WSJ)

Shares of Groupon (NASDAQ: GRPN) fall as research firms cut ratings. (WSJ)

Nokia (NYSE: NOK) returns to the U.S. with a $50 smartphone with T-Mobile service. (WSJ)

E-book prices rise quickly. (WSJ)

EU leaders continue to move away from the solid front they had last week. (WSJ)

The NFL signs new nine-year deals with Fox, NBC and CBS, which will pay an average of 65% more than their previous arrangements. (WSJ)

More oil companies seek leases for Gulf of Mexico drilling. (WSJ)

Brazil will try to shutter the operations of Chevron (NYSE: CVX) and Transocean (NYSE: RIG) as the government attempts to collect $11 billion over leak damages. (WSJ)

First Solar (NASDAQ: FSLR) sharply cuts forecasts. (WSJ)

LightSquared’s high-speed internet would hurt GPS signals, according to the federal government. (WSJ)

Credit Agricole sharply cuts expenses in the face of the EU crisis. (WSJ)

Detroit sells $484 million in bonds but at very high rates. (WSJ)

Charles Schwab (NYSE: SCHW) and E*Trade Financial (NASDAQ: ETFC) are hurt by drops in trading volume. (WSJ)

China puts tariffs on U.S. cars with large engines. (NYT)

OPEC increases output levels. (NYT)

IBM (NYSE: IBM) settles an antitrust case with the EU. (NYT)

Foreign-owned banks in the U.S. are losing deposits on a flight to safety. (FT)

Douglas A. McIntyre

Filed under: Private Equity Tagged: AMZN, C, CVX, ETFC, FSLR, GRPN, IBM, LRCX, NOK, NVLS, RIG, RIMM, SCHW, SNE

What’s New in the Financial World (12/6/2011) The Rise of Shale, BP Fights With Halliburton

247wallst — Tue, 06 Dec 2011 11:29:20 +0000

Eurozone on notice. The situation in Europe, so promising just days ago, took a sharp turn for the worse. S&P put 17 nations in the euro area on credit watch and said it might even downgrade AAA-rated nations, including Germany and France. In theory, this might increase their borrowing costs. In fact, it probably will. Money from international capital markets investors has already begun to shift into safe haven U.S. Treasuries. The S&P action is yet another warning to EU leaders that economists see the sovereign situation deteriorating, as long as the European Central Bank and International Monetary Fund will not provide substantial aid to the weakest nations in the regions, and the eurozone itself will not quickly create a loan facility. News that Angela Merkel and French president Sarkozy want a treaty to force more fiscal discipline within the region hardly provides a road map for a rescue.

Deepwater Horizon fallout. The fighting among the companies involved in the Deepwater Horizon catastrophe has escalated a year-and-a-half after the rig’s explosion. BP (NYSE: BP) has accused oil services company Halliburton (NYSE: HAL) of suppressing data about its role in the incident. The charge is serious and eventually could lead to accusations of fraud. The firms responsible for the well, which also include Transocean (NYSE: RIG), still face tremendous liability. Thousands of individuals and business have staked claims for damages caused by the explosion and leak. The U.S. government and those of several states may bring actions of their own that could seek large penalties.

USPS cuts. The U.S. Postal System’s management continues to advocate greater cuts to save itself from billions of dollars in losses and the weight of its pension plans. Congress may not support these suggestions. There will be political fallout if hundreds of post offices are closed and tens of thousands of postal union members are fired. The most visible of the suggestions made by the Postmaster General is that first-class mail no longer be delivered in one to three business days. The window for delivery would be lengthened to two to five days. But the postmaster is not the captain of his own fate. His suggestions could fall on deaf ears in Congress.

Facebook ad revenue. Facebook sharply increased its market share of online advertising among portals from 2009 to 2010. The trend is more troubling for Facebook competitors, if the 2006 to 2010 period is used as a measurement. Facebook has 0.6% of global internet ad expenditures among portals in 2006. That number was 3.1% last year. The victims of Facebook’s success are primarily Aol (NYSE: AOL), Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO), each of which has had little if any improvement in ad revenue so far in 2011 compared to last year.

Shale gas growth. The shale gas industry should support more than 850,000 jobs by 2015 and contribute $118 billion to GDP. That is according to a new study from global research firm IHS. The news is unexpected. U.S. energy job growth was not supposed to come from fossil fuel businesses. It has been widely assumed that America had begun to exhaust those assets. Wind, thermal and solar business were anticipated to be the major creators of energy jobs. All three industries have stumbled due to high costs and slow adoption. The success of shale gas shows that new means of exploration and exploitation of fossil deposits still have a promising future.

Douglas A. McIntyre

Filed under: Market Open Tagged: AOL, BP, HAL, MSFT, RIG, YHOO

24/7 Wall St. Closing Bell (HD, GMCR, NFLX, STP, RIG, CPN, AEO, JOSB, SDRL, ARO, KKD, ZOLT, AATI, PCX, AVL, JASO, SFLY)

Paul Ausick — Wed, 30 Nov 2011 21:07:58 +0000

Strong reports from the Chicago purchasing managers index and pending home sales juiced the equity markets this morning, and the gains held up throughout the day. Part of the bounce is due to a lowering of China’s capital reserves requirements on its banks and to a weaker dollar. Crude oil prices rose nearly 2% this morning, but the EIA report of a large inventory increase sent prices back down by mid-morning. WTI crude is trading at $100.27/barrel, after posting a high this morning of $101.75/barrel. Gold is up sharply, at $1,745.30, a rise of nearly 2%. The three major indexes have all been trading more than 3% higher for virtually the whole day.

The unofficial closing bells put the DJIA up nearly 489 points to 12,044.55 (4.23%), the NASDAQ rose nearly 105 points (4.17%) to 2,620.34, and the S&P 500 rose 4.33% or nearly 52 points to 1,246.94.

There were several analyst upgrades and downgrades today, including Home Depot Inc. (NYSE: HD) reiterated as ‘buy’ with a $46 price target at Argus. Other ratings actions included Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) reiterated as ‘buy’ with a $94 price target at Canaccord Genuity; Netflix, Inc. (NASDAQ: NFLX) cut to ‘underperform’ at Wedbush; Suntech Power Holdings Co. Ltd. (NYSE: STP) reiterated as ‘hold’ at Argus; Transocean Ltd. (NYSE: RIG) cut to ‘hold’ at Argus; and Calpine Corp. (NYSE: CPN) cut to ‘hold’ at Jefferies. See our story on Transocean’s stock offering and proposed debt offering.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: American Eagle Outfitters Inc. (NYSE: AEO) is up 3.3%, at $13.87; The Fresh Market, Inc. (NASDAQ: TFM) is up 5.7%, at $38.73; Jos. A. Banks Clothiers, Inc. (NASDAQ: JOSB) is down -6%, at $48.09; and SeaDrill Ltd. (NYSE: SDRL) is up 6.3%, at $34.82. After markets close today, Aeropostale, Inc. (NYSE: ARO) and Krispy Kreme Doughnuts Inc. (NYSE: KKD) will report earnings.

Several other standouts from today are as follows…

Zoltec Companies, Inc. (NASDAQ: ZOLT) is up 41.5%, at $8.11. The advanced materials maker reported better-than-expected earnings after markets closed yesterday.

Advanced Analogics Technologies, Inc. (NASDAQ: AATI) is up 32.5%, at $5.75. The power management chip maker is being acquired by Skyworks Solutions Inc. (NASDAQ: SWKS) for $258.6 million, or about $6.05/share.

Patriot Coal Corp. (NYSE: PCX) is up 18.7%, at $10.30. This coal miner, like virtually all its competitors, is down about -40% for the past 12 months. There’s no news to justify today’s price jump, but the company’s thermal coal does sell well in cold weather.

Avalon Rare Metals Inc. (AMEX: AVL) is up 20.3%, at $3.26. The rare earths miner made this big move on no news, but competitor Molycorp Inc. (NYSE: MCP) did a deal with two Japanese companies to manufacture very powerful magnets in Japan for use in wind turbines and other high-tech products.

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) is up 16.6%, at $1.80. The solar PV maker is among several Chinese solar companies moving up today, no doubt as these are considered the most likely to survive a shakeout in the solar manufacturing sector.

Shutterfly, Inc. (NASDAQ: SFLY) is down -12%, at $27.02, after posting a new 52-week low of $26.93 earlier today. The social media company is facing intense competition for its on-line photo products.

Stay tuned for Thursday. Here’s a list of other noteworthy events scheduled for tomorrow(all times Eastern):

8:30 a.m. – New unemployment claims
9:45 a.m. – Bloomberg consumer comfort index
10:00 a.m – Industrial Supply Management manufacturing index
10:30 a.m. – EIA natural gas weekly report
4:30 p.m. – Federal Reserve balance sheet
4:30 p.m. – Money supply report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AATI, AEO, ARO, AVL, CPN, GMCR, HD, JASO, JOSB, KKD, NFLX, PCX, RIG, SDRL, SFLY, STP, ZOLT

Transocean Secondary Offering Completed, New Debt Up Next (RIG)

Paul Ausick — Wed, 30 Nov 2011 15:48:27 +0000

Transocean Ltd. (NYSE: RIG) yesterday announced a secondary offering of 26 million shares. The sale was completed today at a share price of $40.50, more than a dollar lower than the stock’s closing price yesterday of $41.63. Such a sale normally pushes the share price down, but in Transocean’s case shares are actually up today. The reason for the rise is interesting, to say the least.

The share sale was barely behind the company when Transocean announced that its wholly owned subsidiary, Transocean Inc., would offer new senior notes under a shelf registration the company filed in September 2010. Here’s what the company has to say about the new notes:

Transocean Inc. intends to use a portion of the net proceeds from the offering to fund (after the application of the proceeds of Transocean Ltd.’s previously announced equity offering) the expected repurchase of its 1.50% Series B Convertible Senior Notes due December 2037 that holders of the Series B Convertible Senior Notes may require it to repurchase in December 2011. In addition, Transocean Inc. intends to use a portion of the net proceeds from the offering to refinance all commercial paper notes outstanding under its commercial paper program. Transocean Inc. plans to use the remainder, if any, of such net proceeds for general corporate purposes in its operations, including but not limited to capital expenditures, acquisitions or repayment or refinancing of debt. Pending application of the net proceeds from the sale of the senior notes, Transocean Inc. intends to invest such proceeds in cash or cash equivalents.

The new senior notes will be offered in three tranches: a 5-year, a 10-year, and a 30-year issue. The company has not specified either the price of the notes or the total amount of the offering.

According the company’s SEC filing today, the company’s expects to repurchase $659 million of its outstanding 1.50% Series B Convertible Senior Notes with proceeds from the new notes offering. The total outstanding on the Notes is about $1.7 billion. Note holders may require the company to repurchase the convertible notes by the end of December, and Transocean is building a war chest to do that.

Transocean also claims to have $79 million outstanding in its commercial paper program. The entire amount would be covered in this new note offering. Transocean noted that its total debt, as of September 30, 2011, equalled $11.1 billion, of which about $2 billion is due within one year. The remaining $9.1 billion is long-term debt. That amount does not include $1.8 billion in debt related to the company’s completion of its acquisition of Aker Drilling ASA in October.

Moody’s put Transocean on ratings review for a possible downgrade in mid-November, and the company faces the first of what could be many courtroom appearances in connection with its role in the Macondo well explosion last year in the Gulf of Mexico. S&P and Fitch Ratings have already lowered Transocean’s debt rating to a single notch above junk.

So why is the share price rising today? The answer has to be that today’s successful share offering has quieted concerns about the company’s ability to raise cash and is likely to forestall any further credit rating downgrades. A strong stock market is also helping, of course. Transocean’s shares are up nearly 4%, at $43.29, in a 52-week range of $41.28-$85.98.

Paul Ausick

Filed under: Oil & Gas, Secondary Offering Tagged: RIG

Top Analyst Upgrades & Downgrades (AMR, CAB, CPN, ERTS, GT, GMCR, HD, LEAP, NAV, NFLX, EDU, NMR, OVTI, STP, RIG, WSH)

Administrator — Wed, 30 Nov 2011 13:25:29 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Wednesday morning.

AMR Corporation (NYSE: AMR) Cut to Sell at Citigroup.
Cabela’s, Inc. (NYSE: CAB) named as Bull of the Day at Zacks.
Calpine Corporation (NYSE: CPN) Cut to Hold at Jefferies.
Electronic Arts Inc. (NASDAQ: ERTS) Raised to Buy at Citigroup.
Goodyear Tire & Rubber Company (NYSE: GT) named as value stock of the day at Zacks.
Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) Reiterated Buy with $94 target at Canaccord Genuity.
Home Depot Inc. (NYSE: HD) Reiterated Buy with $46 target at Argus.
Leap Wireless International Inc. (NASDAQ: LEAP) Raised to Outperform at RBC Capital.
Navistar International Corporation (NYSE: NAV) Raised to Neutral at Goldman Sachs.
Netflix, Inc. (NASDAQ: NFLX) Cut to Underperform at Wedbush.
New Oriental Education & Technology Group (NYSE: EDU) Started as Outperform at Credit Suisse.
Nomura Holdings, Inc. (NYSE: NMR) Started as Neutral at Credit Suisse.
OmniVision Technologies Inc. (NASDAQ: OVTI) maintained Buy on valuation but cut target to $12 at Canaccord Genuity.
Suntech Power Holdings Co. Ltd (NYSE: STP) Reiterated Hold at Argus.
Transocean Ltd. Co. (NYSE: RIG) Cut to Hold at Argus.
Willis Group Holdings, Plc (NYSE: WSH) named as Bear of the Day at Zacks.

JON C. OGG

Filed under: Analyst Calls Tagged: AMR, CAB, CPN, EDU, ERTS, GMCR, GT, HD, LEAP, NAV, NFLX, NMR, OVTI, RIG, STP, WSH

Top Active Trader Alert Stocks (RIMM, RIG, YHOO)

Mike Sauter — Tue, 29 Nov 2011 13:51:01 +0000

Crude oil is at $98.25, up 0.04%.

Gold is at $1,711, down 0.19%.

Hong Kong’s Hang Seng closed up 1.21% to 18,256.

Japan’s Nikkei closed higher by 2.29% to 8,477.

The U.S. 10-year is at 1.99%, up 0.o1%.

The FTSE is down 0.25% to $5,300.

The DAX is down 0.10% to $5,740.

Research In Motion, Ltd. (NASDAQ: RIMM) is down 3.6%, relative to $17.08, relative to a 52-week range of $15.98 – $70.54.

Transocean, Ltd. (NYSE: RIG) is down 5.6% to $43.35, relative to a 52-week range of $43.15 – $85.98.

Yahoo!, Inc. (NASDAQ: YHOO) is up 2% premarket to $15.67, relative to a 52-week range of $11.09 – $18.84.

Filed under: General Tagged: RIG, RIMM, YHOO

Implied Gains in Oil Field Services Stocks May Not be Real (SLB, HAL, BHI, RIG, NOV, WFT)

Paul Ausick — Fri, 18 Nov 2011 19:01:10 +0000

Share prices for the oil field services companies dipped in late July shortly after many of the companies had posted new 52-week highs. The stocks have been struggling since then, primarily as a result of falling forecasts for global demand growth in 2012. Both the International Energy Agency and OPEC have been cutting growth estimates for next year based on continuing overall weakness in the global economy.

In its November report, OPEC cut its estimate of world economic growth in 2012 from 3.7% to 3.6%, though the cartel did leave its oil demand forecast unchanged at 1.2 million barrels/day, up from 900,000 barrels/day of increased demand in 2011. OPEC expects demand for its crude to rise by 1 million barrels/day next year, and non-OPEC demand to rise by 200,000 barrels/day. The services companies need stronger demand growth if they are themselves to grow.

The six companies we’ve looked at for this report are Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), BakerHughes Inc. (NYSE: BHI), Transocean Ltd. (NYSE: RIG), National Oilwell Varco, Inc. (NYSE: NOV), and Weatherford International, Inc. (NYSE: WFT). All have market caps greater than $10 billion, even though share prices have fallen by a minimum of -1% since the end of July.

All data from Yahoo! Finance, and current share prices were gathered just before noon today.

Schlumberger Ltd. (NYSE: SLB) has a median target price of $94.00 from 27 brokers. Shares are trading today at $70.79, for a potential upside of $23.21, or 32.8%. The company pays a dividend yield of 1.3 and has a forward P/E of 14.46. Schlumberger’s target price has dropped from $105 to $94 in just four weeks, and its share price today is barely 1% higher than it was then. The company missed expectations on its last earnings report and the weaker demand and economic forecast going forward continues to put pressure on the stock. The company’s target price is in no imminent danger of being reached. In fact, the target will likely be revised downward again before the company reports fourth quarter earnings. EPS estimates for the fourth quarter have fallen by $0.10 in the past 60 days.

Halliburton Co. (NYSE: HAL) has a median target price of $53.50 from 28 brokers. Shares are trading today at $35.93, for an implied gain of $17.57, or 48.9%. The company pays a dividend yield of 0.9% and its forward P/E is 8.84. Halliburton’s target price has fallen from $63.00 to $53.50 in the past four weeks, even though the company managed to beat third quarter EPS and revenue estimates. The company has put a lot of eggs in the shale gas and oil drilling basket, and that has so far paid off everywhere but in the company’s share price. Fourth quarter EPS estimates have decreased by -$0.04 in the past 60 days and while the implied upside is very attractive, Halliburton certainly won’t get near it.

Baker Hughes Inc. (NYSE: BHI) has a median target price of $76.00 from 25 brokers. Shares are trading today at $54.24, for an implied upside of $21.76, or 40.1%. The company pays a dividend yield of 1% and its forward P/E is 9.82. Like every other stock in this group, Baker Hughes’ target price has dropped in the past month, from $91.00 to its current level of $76.00. The company missed third quarter EPS estimates, but fourth quarter estimates have risen by $0.01 in the past 60 days. The company’s share price today is -4% lower than it was on October 19th, when we last looked at these stocks. Again, the implied gain is not on the table for the current quarter, and likely not for at least part of next year.

Transocean Ltd. (NYSE: RIG) has a median target price of $67.50 from 34 brokers. Shares are trading today at $48.18, for a potential upside of $19.32, or 40.1%. The company pays a dividend yield of 6.4% and its forward P/E is 11.59. Tranocean stock is still weighed down by the company’s exposure to claims related to the Macondo well explosion that killed 11 workers and spilled 5 million barrels of crude into the Gulf of Mexico. Although the company’s target price has dropped from $71.50, its upside potential remains near the same level it was a month ago. Until that spread narrows, the only way Transocean gets nearer its target price is if the target is lowered again.

National Oilwell Varco, Inc. (NYSE: NOV) has a median target price of $88.00 from 24 brokers. Shares are trading today at $67.32, for an implied upside of $20.68, or 30.7%. The company pays a dividend yield of 0.7% and its forward P/E is 11.51. The company raised its quarterly dividend from $0.11 to $0.12 yesterday, boosting its yield slightly. If any of these services companies has a chance to hit its price target, National is the likeliest mainly because its upside potential is the smallest.

Weatherford International, Inc. (NYSE: WFT) has a median price target of $22.50 from 26 brokers. Shares are trading today at $14.95, for an implied gain of $7.55, or 50.5%. The company pays no dividend and its forward P/E is 9.88. Weatherford’s share price today is about -1.3% below its level of a month ago, and its it target price is $1.50 lower. That says about all there is to say about Weatherford’s ability to deliver those implied gains.

Of all these companies, only National Oilwell Varco has much of a chance to deliver on these promises of expected gains. Its price target fell from $95 to $88, putting the target within reach, but not so close that it will be automatic. Even rising crude oil prices aren’t likely to spur a lot more exploration and drilling in the near term, and that’s what National and the rest of this group needs.

Paul Ausick

Filed under: Analyst Calls, Oil & Gas, Value Investing Tagged: BHI, HAL, NOV, RIG, SLB, WFT

BP Loses Deal in Argentina, But Doesn’t Care (BP, CEO, APC, RIG, HAL, CAM)

Paul Ausick — Mon, 07 Nov 2011 16:03:42 +0000

It isn’t every day that a $7.1 billion deal falls through. Even rarer is a seller’s reaction that amounts to, “What, me worry?” But that’s what occurred over the weekend as BP plc (NYSE: BP) failed to meet a November 1st deadline for regulatory approvals of its sale of 60% of Argentina’s Pan American Energy to its partners, China’s Cnooc Ltd. (NYSE: CEO) and Argentina’s Bridas Corp.In a statement, BP noted that Bridas had the responsibility to obtain the anti-trust approval from both Chinese and Argentinian regulators. BP will now have to return a $3.5 billion cash down payment to Bridas/Cnooc. BP said it was “happy” to retain these “valuable” assets, “given the considerable improvement in its own financial strength and circumstances.”But in its most recent quarterly report, BP also said it now plans to boost its asset sales from a previously announced total of $30 billion to $45 billion. Before the cancellation of the Pan American sale, BP announced agreements to dispose of assets worth about $26 billion, including the sale to Bridas/Cnooc. That total now stands at around $19 billion.

A couple of developments could be responsible for the company’s casual attitude to the loss of the Pan American sale. First, its two partners in the Macondo well, Anadarko Petroleum Corp. (NYSE: APC) and Japan’s MOEX, have kicked in $4 billion and $1 billion, respectively, to the reserve fund BP has set up to pay claims resulting for the explosion that killed 11 workers and dumped millions of barrels of oil into the Gulf of Mexico. Anadarko also relinquished its 25% stake in the well.

BP still has claims outstanding against Transocean Ltd. (NYSE: RIG) and Halliburton Co. (NYSE: HAL), demanding a minimum of $40 billion from Transocean and an unspecified amount from Halliburton. BP is also seeking compensation from Cameron International Corp. (NYSE: CAM), makers of the blowout preventer that failed.

A recent federal investigation may have strengthened BP’s position in relation to both these outstanding lawsuits, so much so that Anadarko was willing to pay now in exchange for getting immunity from further payments. BP has got to be counting on at least some payments coming from Transocean and Halliburton to help ease the total $42 billion the company has so far committed to the clean-up and claims funds.

BP has so far gotten off pretty lightly in claims payments, having paid out just over $7 billion of the $20 billion it put into the claims fund back in 2010. That could lead the company to believe that it may get off the hook for as little as half the full amount. Coupled with the encouraging (for BP) report from the latest federal investigation, the $42 billion commitment may cost BP far less.

So why increase asset sales? Here’s what BP said in a statement over the weekend: “BP’s current divestment programme is focused on the sale of non-strategic assets and not driven by a requirement to raise cash. As such, BP does not currently plan to divest additional assets to offset proceeds which would have been received from the [Pan American] transaction.”

The company thinks it sees an upper limit to its liability for the Macondo disaster that is smaller than it originally planned for and believes that now is the time to return to more normal operations. The company has received permission for new drilling in the Gulf and is restarting its other operations there as well. BP also has $18 billion in cash that is not committed to the Gulf clean-up and claims funds.

BP may be right about its chances, but taking its fights with Transocean and Halliburton to court is at least as risky for BP as it is for the others. If BP is found to have been grossly negligent, its fines could jump three-fold. Even if it is ajudged innocent of gross negligence, the company remains on the hook for nearly $16 billion.

BP’s charm offensive dealing with the effects of the spill has had its intended effect on US regulators. The company’s production restart and new drilling permit are the evidence of that. The second part of its charm offensive is now going to be directed at investors through re-instated dividends and asset sales that will boost profits.

The Pan American sale could still happen, but not because BP needs the cash. If the deal happens now, it will accrue to the benefit of shareholders. That’s a pretty slick transition. And it only took BP a year to make it happen. Look for Bob Dudley to get a nice bonus in his next pay review.

Paul Ausick

Filed under: Mergers and Buy Outs, Oil & Gas, Regulation Tagged: APC, BP, CAM, CEO, HAL, RIG