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Transocean LTD (RIG), Noble Corporation (NE): Fir Tree Takes 8.3 % Stake in Offshore Driller

Other offshore drillers include Transocean LTD (NYSE:RIG), ENSCO PLC (NYSE:ESV), and Diamond Offshore Drilling Inc (NYSE:DO); most of Nabors Industries Ltd. (NYSE:NBR)‘s operations occur onshore but it does operate some offshore rig assets as well. Noble Corporation (NYSE:NE) is even with this peer group in terms of where it is valued compared to forward earnings estimates: all five end up in the 7-10 range. In some cases, the trailing P/Es aren’t exactly high either, and combining that fact with high growth expectations results in quite low five-year PEG ratios. Ensco, for example, is valued at only 11 times its trailing earnings. Transocean LTD (NYSE:RIG) had to take a large writedown last year, but its adjusted earnings per share would place it at a similar level. We’d also note that billionaire activist investor Carl Icahn has taken a large stake in Transocean LTD (NYSE:RIG) and has been pushing for the company to return more cash to shareholders.

Noble Corporation (NYSE:NE) does appear to have strong growth prospects, so much so that the company has room to fall short of analyst targets and still turn out to be a good value. However, the same can be said for other companies in offshore drilling, including some where the trailing earnings multiple is actually in or closer to value territory and therefore the business is less dependent on growth. As a result we’d recommend that interested investors start looking at Ensco or Transocean LTD (NYSE:RIG) and then consider Noble Corporation (NYSE:NE) and the rest of its peers if those companies turn out to have substantial issues.

Disclosure: I own no shares of any stocks mentioned in this article.

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