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The Zacks Analyst Blog Highlights: Transocean, Eni SpA, Total, Royal Dutch Shell and Tenet Healthcare

RIG E TOT RDS.A THC

 ZacksTrade Now

For Immediate Release

Chicago, IL – October 23, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Transocean Ltd. (RIG - Analyst Report), Eni SpA (E - Analyst Report), Total SA (TOT - Analyst Report), Royal Dutch Shell plc (RDS.A - Analyst Report) and Tenet Healthcare Corp. (THC - Analyst Report).

 

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Here are highlights from Monday’s Analyst Blog:

 

Transocean Updates Fleet Status

 

Recently, offshore drilling giant – Transocean Ltd. (RIG - Analyst Report) issued a monthly ‘Fleet Update Summary’ covering the company’s drilling rig status and contract information.

Per the report, the company’s high specification deewater floater Sedco Express won a 20-month contract from Eni SpA (E - Analyst Report) to work in the offshore region of Nigeria. The contract is executable from February 2013 at a revised dayrate of $600,000 against a prior dayrate of $500,000.

Transocean’s GSF Constellation II received 30-month contract to operate in the waters of Gabon – from Total SA (TOT - Analyst Report). The dayrate for the job is fixed at $160,000, higher than the earlier dayrate of $109,000.

Midwater floater – Transocean Amirante– got the 180-day option from Burullus Gas Company to work in the Egyptian waters at a dayrate of $305,000. The drillship’s previous dayrate was $275,000.

However, drillship GSF Rig 103 has been sold for an undisclosed amount.

Since the last update on September 18, new contract and extensions totaled a backlog of about $8.1 billion. This includes the $7.6 billion contract value of the 10-year agreement signed between Transocean and Royal Dutch Shell plc (RDS.A - Analyst Report), whereby the former will build four new drillships.  

Transocean is the leading offshore drilling contractor and the provider of drilling management services worldwide. Its current contract drilling fleet comprises 115 mobile offshore drilling facilities, which again include 48 high-specification deepwater floaters, 25 mid-water floaters and 9 high-specification jackups. The fleet also has 32 standard jackups and one swamp barge that have been termed as discontinued operations.

Transocean currently has six ultra deepwater drillships and three high-specification jackups under construction.

We are maintaining our long-term ‘Neutral’ recommendation on the stock. We believe that Transocean is the industry leader in deep sea drilling with its state-of-the-art mobile offshore drilling fleet that can function in most challenging environments across the globe.

However, operational issues such as fluctuating dayrates and high costs along with the company’s high debt have kept us on the sidelines.

 

 

 

Tenet Downgraded to Neutral

 

We have downgraded our recommendation on Tenet Healthcare Corp. (THC - Analyst Report) to Neutral from Outperform based on its rising expenses and bad debts coupled with a highly leveraged balance sheet.

However, strong organic and inorganic growth and strategic plans to optimize capital structure are the positives.

Tenet Healthcare is scheduled to announce its third quarter results on November 7 before the bell. The Zacks Consensus Estimate for the quarter is currently pegged at 36 cents, reflecting a 126.7% year over year improvement.

Tenet Healthcare has been generating consistent growth in operating revenues since 2006. The first half of 2012 also witnessed operating revenue growth of 4.2% year over year to $4.57 billion. The improved results were attributable to significant contribution from Tenet Healthcare’s general hospitals, which have generated revenues in excess of 96% of the net operating revenues for all periods.

Tenet Healthcare has also been steadily expanding its operating capacity via acquisitions and alliances. Moreover, the company is trying to enhance business growth and optimize its capital structure through financial and strategic plans comprising acquisitions, share repurchases, debt repayment and a reverse stock split. While the acquisitions will be directed toward strengthening the company’s main business lines, the planned share buyback will enhance earnings per share and boost shareholder value.

However, Tenet Healthcare is a highly leveraged company with approximately $4.51 billion long-term debt as of June 30, 2012, compared with shareholders’ equity of only $1.18 billion. This implies a long-term debt-to-equity ratio of 3.88.

 

 

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