Noble Corp. (NYSE:NE) and Valaris (NYSE:VAL) shares tilt slightly lower in Tuesday’s trading as Clarksons downgraded the offshore drilling contractors to Neutral from Buy with respective $31 and $54 price targets, saying estimates from sell–side analysts now predict EBITDA within the sector will remain flat over the upcoming three-year period, marking the first time in four years where a “no growth” outlook has emerged.
Clarksons analysts said Noble (NYSE:NE) has performed well in securing additional backlog YTD, and the company’s backlog has climbed to $6.9B from $5.8B as of year-end 2024, but the backlog is concentrated across the high–end floaters in the fleet, while the jackup side, particularly the non–CJ70s in the North Sea, have little to no backlog for next year, which poses an element of risk to 2026 estimates that have not necessarily been properly captured by consensus.
Noble (NE) should be able to maintain its current $2.00/share annual dividend, yielding 7%, but “estimates leave little room for further growth without having to eat (uncomfortably) into cash reserves,” Clarksons said.
Valaris (NYSE:VAL) is a name that is “cheap on steel, but expensive on multiples and cash flows,” Clarksons said, adding that it believes it can find better risk/reward in other U.S. peers, based on revised estimates and recent stock performance.
Clarksons reiterated a Buy rating on Transocean (NYSE:RIG) while lowering its PT to $4 from $5.30, saying the stock deserves its premium pricing as it boasts the largest backlog in the industry, with 64% of revenue projections for 2026-27 already secured through firm contracts, and given that most of the backlog is at favorable rates, the company should be well-placed to produce significant free cash flow.
The shipping services consultancy anticipates the majority of Transocean’s (NYSE:RIG) cash flow, at least for 2025-26, will be directed towards reducing debt levels, consistent with the company’s statements.