It’s time to buy Transocean ahead of massive growth for the offshore drilling company, according to Barclays. Analyst J. David Anderson double upgraded shares of Transocean to overweight from underweight, saying that the stock will benefit from the revival of offshore drilling as an investable theme. “As the longest of the three primary upstream spending cycles [North America, International Land], we didn’t expect Offshore to see improvement until the second half of 2023, but the signs are undeniable that Offshore markets are poised for potentially massive growth over the next several years,” Anderson wrote in a Thursday note. Barclays raised its price target on the stock to $5 from $3.50, representing 66.7% upside from Wednesday’s closing price of $3. Transocean rose 3% in Thursday premarket trading. Transocean will benefit from rising offshore activity, which inflected several quarters earlier than analysts were expecting. According to the note, the leading edge deepwater dayrates have already spiked “above $400kpd, likely to hit $500k next year.” “With 8 of 20 floaters repricing contracts next year, RIG has a tremendous amount of operating leverage, combined with significant financial leverage (7x) that will improve on FCF generation in 2024/25,” Anderson wrote. Transocean is among the stock picks the analyst thinks will benefit most from the pending multiyear global investment cycle into energy, as the world will struggle to resolve oil supply constraints for years. “[The] Int’l and Offshore markets have decoupled from global oil demand – these are the multi-year projects needed to fill a looming global supply gap,” Anderson wrote. —CNBC’s Michael Bloom contributed to this report.
