Transocean LTD (RIG) Sees Potential Stock Upside in Coming Years After Macondo Issues

March 4, 2013

Analysts describe a potentially more positive future for Transocean LTD (RIG) stock after the Macondo oil spill in the Gulf of Mexico in 2010, citing improved operational procedures and the name trading at a discount:

“We like Transocean. It’s coming off of a hangover of sorts from Macondo and from some issues in Brazil. With the impact from Macondo becoming clearer and the liabilities slowly getting settled, Transocean is attractive. It’s traded at a discount to its peers recently, and historically it has traded at a premium,” said Trey Stolz, Managing Director of Oilfield Services Research at IBERIA Capital Partners.

The stock has also attracted the attention of activist investors:

“First, Carl Icahn got involved in Transocean early this year. Even though it was widely viewed as an undervalued name, I think Carl Icahn getting involved really brought the story to the fore again. I believe that it is a company that really did a great job re-engineering itself following Macondo. They launched a number of internal initiatives to address some of their shortfalls in procedures, and they are upgrading the whole infrastructure of the company. After about 18 months of that, I think that 2013 and 2014 will be very bright for Transocean, because a number of those initiatives should provide benefits in the upcoming years. I think that may be one of the many reasons why Mr. Icahn got involved in the name,” said Nigel Browne, Equity Research Analyst at Macquarie Capital.

Finally, they also mention RIG‘s cash return strategies:

“There are other companies such as Ensco, Transocean and Noble, which are in the process of returning more cash,” said Scott Gruber, Senior Research Analyst at Sanford C. Bernstein & Co., LLC.