Retuers noted that the new company began trading at a valuation of $3.6b which is slightly below its holding book value at Maersk. Wood McKenzie analyst Leslie Cook had some positive things to say about the new company:
The newly independent TDC 1972 is the strongest competitor among their mid-sized peers. Their floating rig utilization is 75% (with six of their eight rigs working), while industry average for all floaters remains below 70%….
“The company recently announced a $300 million long-term contract with Inpex for the Maersk Deliverer semi-submersible. Average contract lengths for floating rigs in 2018 were approximately 200 days. The recent Maersk Deliverer contract is for 1,095 days.
“The company also holds a leading position in the ever-growing harsh environment jack-up market. Over 50% of their jack-ups are rated for harsh environment and they have more harsh environment jack-ups in their fleet than any other company
Additionally, she thinks that The Drilling Company of 1972 will be an acquisition target for the big players in the industry:
While only a few of the large drilling companies – Transocean, Ensco, and Seadrill – have elected to make acquisitions in the past two years, we believe that TDC 1972 will be part of the consolidation narrative in the near term.
The first takeaway from her comments is that the analyst shorthand for the company is TDC 1972. That still feels like a mouthful for modern conversations though. Couldn’t they have come up with something ‘clever’ like Kontoor, Mondelez or Aptiv? Where were the pricey consultants!? Any readers have a snappy suggestion for the company?
The second takeaway is that it seems like there could be some upside in the name. It’s worth remembering that the offshore rig market has been tough though and that there is a lot of competition (oversupply) for limited demand. In the past, we have seen some weaker players in the industry fold, particularly those in challenging geographies. Even if The Drilling Company of 1972 is well positioned and a strong operator, it’s still captive to the overall, cyclical macro environment.
One other thing to watch is whether or not the Maersk family hangs onto their shares after their 360 day lockup period expires. They did push for the strategy shift so maybe they want out for good?
Disclosure: Author holds no position in any stock mentioned.