There’s almost no middle ground with the offshore drillers these days–you either love ‘em or hate ‘em. Unless you’re Morgan Stanley, who hates Diamond Offshore Drilling a bit less today.
Bloomberg Today, Morgan Stanley analysts Ole Slorer and Jacob Ng upgraded shares of Diamond Offshore to Equal Weight from Underweight. They explain why:
Our Underweight thesis based on significant negative earnings revisions has largely played out. We also believe that the cycle is turning and that floater availability has peaked. At this point, Diamond Offshore enjoys attractive yield support coupled with significant upside optionality, in our view…
We expect trading to be driven increasingly by the reduction of floater availability through a pickup in fixtures rather than the confirmation of negative data points on dayrates. We see negative sentiment on the group reversing to the extent that ballooning floater availability is absorbed from upcoming contract announcements.
The upgrade hasn’t just lifted Diamond Offshore Drilling, but has given a boost to offshore drillers like like Transocean (RIG), Atwood Oceanics (ATW), Noble (NE) and Ensco (ESV) as well.
Shares of Diamond Offshore Drilling have jumped 1.3% to $50.85 at 10:29 a.m., while Transocean has advanced 0.7% to $42.32, Atwood Oceanics has risen 0.9% to $48.76, Noble has gained 0.6% to $30.67 and Ensco is up 0.4% at $51.60.
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