Petrobras needs more oil rigs, Transocean's shares surge

Posted May 15th 2008 4:44PM by Joseph Lazzaro
Filed under: Oil, Stocks to Buy

Oil driller Transocean, Inc. (NYSE: RIG), whose shares have probed, but have been unable to move and stay permanently above $160 -- may have received the catalyst it needs to reach loftier price levels.

Transocean's shares jumped $8.34, ending at $155.54 after Bloomberg News reported that Petroleo Brasileiro (NYSE: PBR), Brasil's state-controlled oil company, leased about 80% percent of the world's deepest-drilling offshore rigs to explore prospects. That included the Western Hemisphere's biggest discovery in decades, the Tupi field. Further, the activity of Petroleo, also known as Petrobras, is forcing up day-rates for oil rigs. PBR also closed higher Thursday, up $2.00 to $68.27.

Further, Petrobras is in talks with Transocean to extend leases as much as three years ahead of expiration, Robert Long, chief executive officer for the Houston-based RIG, told Bloomberg News. Also, Petrobras plans to start pumping oil from Tupi in Q1 2009. Tupi is the largest oil find in North America since the 1976 Cantarelli field discovery in the Gulf of Mexico.

Stock Analysis: Petrobras' current and future rig demand is bullish for Transocean, first reviewed in this space on November 7, 2007. Transocean is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from RIG's shares. Sell/Stop Loss if you were to purchase shares in this company: $110.

The First Call mean rating for RIG is: Buy [36 firms]. Mean 2008 target: $168.00 [high: $197, low: $118].

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: oil, oil prices, oil services, PBR, Petrobras, Petroleo Brasileiro, RIG, Transocean

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Reader Comments (Page 1 of 1)

5-15-2008 @ 4:55PM

david.hagins said...

Don't forget about Ocean Rig, which is being acquired by DRYS. They have 2 deep sea rigs online, and 2 more coming in 2010, the same time PBR needs them.