Shares of Transocean (RIG) are down $2.28, or almost 4%, at $56.96, after BP (BP) seems in recent days to have tried to shift blame for the Gulf of Mexico oil spill to the drill rig’s owner.
Things haven’t been helped by President Obama’s remarks on Saturday that Gulf drilling would proceed only with the assurance a similar disaster will not occur. There were also hints in those remarks that criminal investigations could ensue at some point.
Nevertheless, FBR Capital’s Robert MacKenzie this morning upgraded shares of Transocean to “Outperform” from “Market Perform,” writing that the blowout preventer aboard the rig that should have acted as a failsafe may have become encrusted in “hydrates” — a kind-of dirty ice made of water and natural gas in solid form — that could have obstructued proper functioning.
That might relieve Transocean of some blame, writes MacKenzie, citing details from a BP document about the rig’s functioning, which was released by Congress after BP and Transocean executives testitifed.
“We believe that RIG, being one of the hardest-hit stocks in the wake of the blowout, could see substantial stock price upside in coming weeks if our theory about gas hydrates affecting the BP gains traction,” writes MacKenzie.
MacKenzie gives RIG an $87 price target, representing a forward P/E of 10 times on 2011 earnings, with present RIG book value at roughly $45, factoring in various adjustments related to the 2007 merger with GlobalSantaFe.
MacKenzie also offers a couple options scenarios, including buying June $65 calls for $1.85, or selling August 50 puts for $3.15.
Meantime, BP is off $1.13, or 2.6%, at $42.73, while Cameron International (CAM), which made the blowout preventer in question, is off 76 cents, or 2%, at $35.08.
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