Energy Business

RBC Makes Bold Offshore Drilling Call by Upgrading Top Companies

Oceaneering International

This is another deep water driller and a contrarian play that could have potential as a takeover target. Oceaneering International Inc. (NYSE: OII) is a global provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of its applied technology expertise, Oceaneering also serves the defense, entertainment and aerospace industries.

The company announced earlier this year that Rod Larson, who was serving as the company president, would succeed Kevin McEvoy as chief executive officer. The change at the top was effective back in May.

The RBC analysts raised the stock to Outperform from Underperform, and they have a $33 price target, which is up from the previous $25. The consensus target price for the shares is $27.10. The stock traded up more 5% Friday morning at $23.45.

Rowan Companies

This is a solid value play in the offshore arena. Rowan Companies PLC (NYSE: RDC) is a global provider of contract drilling services with a fleet of 29 mobile offshore drilling units, composed of 25 self-elevating jack-up rigs and four ultra-deepwater drillships. The company’s fleet operates worldwide, including the United States Gulf of Mexico and the U.K. and Norwegian sectors of the North Sea, as well as the Middle East and Trinidad.

This is another company the analysts feel will be putting idle or stacked rigs back to work over the next two years. The RBC rating was lifted to Sector Perform from Underperform, and the price target was raised to $14.00 from $13.50. That compares with a consensus target of $13.51. The shares were last seen changing hands at $9.70 apiece.

Technip FMC

This is another large cap company that the analysts are becoming more positive on. Technip FMC PLC (NYSE: FTI) is a U.K. company and a global leader in subsea equipment and onshore and offshore engineering and construction projects. It also has activities on the surface, including drilling and well services.

The analysts are raising earnings estimates for 2017 through 2019, and they feel that final investment decision sanctioning will accelerate for the company over the next 24 months.

The rating moved to Outperform from Sector Perform, and the RBC set its price target at $37. The consensus target is $35.91, while the shares were trading on Friday at $25.65.

The RBC analysts are making a bold call as many on Wall Street remain negative overall on offshore drilling and services. However, for aggressive energy investors, there could be some big gains in these companies if the overall RBC improvement thesis plays out over the next few years.