Seadrill (SDRL) shares soared 8.9% in the last trading session to close at $38.16. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 6.8% gain over the past four weeks.Seadrill’s share price surged yesterday, primarily due to the company's announcement of multiple new offshore drilling contracts totaling approximately $235 million. These contracts bolstered its revenue backlog and enhanced earnings visibility into 2026–2027. Key aw ...

Core Viewpoint - Patterson-UTI's share price surged by 6.4% to $7.03, driven by strong operational and cash flow outlook, alongside impressive trading volume [1][2] Group 1: Operational and Financial Outlook - The company presented a strong operational and cash flow outlook in its January 2026 investor presentation, highlighting better-than-expected cost controls in drilling and resilient completion activity [2] - Adjusted free cash flow for the upcoming quarter is expected to be the strongest of the year, with capital expenditure guidance set under $500 million [2] - The company plans to return at least 50% of adjusted free cash flow to shareholders, reinforcing investor confidence in earnings stability and capital discipline [2] Group 2: Earnings and Revenue Expectations - Patterson-UTI is expected to report a quarterly loss of $0.12 per share, unchanged from the year-ago quarter, with revenues projected at $1.09 billion, down 6.2% from the previous year [3] - The consensus EPS estimate for the quarter has remained unchanged over the last 30 days, indicating a lack of upward momentum in earnings estimates [4] Group 3: Market Position and Comparisons - Patterson-UTI holds a Zacks Rank of 3 (Hold), indicating a neutral outlook in the market [5] - In comparison, Valaris Limited, another company in the same industry, closed 3.8% higher at $53.3 but has seen a -10.9% return over the past month [5][6]

Core Insights - The Zacks Oil and Gas - Drilling industry is facing challenges due to reduced near-term spending, delayed contracts, and rising operational complexities, leading to uneven rig demand and pricing pressures [1][3][5] - Despite the negative outlook, certain companies like Transocean, Helmerich & Payne, and Patterson-UTI Energy are well-positioned to navigate the evolving landscape [1][16][24] Industry Overview - The industry comprises companies providing drilling rigs and services on a contractual basis for oil and gas exploration and development [2] - Offshore drilling companies exhibit higher volatility compared to onshore counterparts, with share prices more closely tied to oil prices [2] Trends Impacting the Industry - **Slower Near-Term Contracting**: Operators are cautious due to fluctuating commodity prices, resulting in delayed contracts and fewer new project approvals [3] - **Deepwater Demand Strengthening**: There is a gradual increase in global deepwater activity, with operators seeking large offshore projects due to underinvestment in reserves [4] - **Rising Operating Complexity and Cost Pressures**: Modern drilling programs are becoming more complex, increasing operational risks and costs, which can strain margins [5] Industry Performance - The Zacks Oil and Gas - Drilling industry ranks 226 out of 243 Zacks industries, placing it in the bottom 6% [6][7] - The industry's earnings estimates for 2025 have decreased by 90% over the past year, indicating a negative outlook [8] Comparative Performance - The industry has underperformed compared to the broader Zacks Oil – Energy sector and the S&P 500, declining by 6.8% over the past year while the sector increased by 3.8% and the S&P 500 gained over 15% [10] Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 4.99X, significantly lower than the S&P 500's 18.66X and the sector's 5.51X [14] Companies to Watch - **Transocean**: A leading offshore drilling contractor with a market cap of $4.9 billion, expected to see 119.2% earnings growth in 2025 [18] - **Helmerich & Payne**: The largest land drilling contractor in the U.S. with a market cap of nearly $3 billion, known for its proprietary FlexRig fleet [22] - **Patterson-UTI Energy**: A major drilling and completions service provider with a significant fleet and a market cap of approximately $3 billion [26]

Company Performance - Helmerich & Payne reported a quarterly loss of $0.01 per share, significantly below the Zacks Consensus Estimate of $0.26, and a decline from earnings of $0.76 per share a year ago, representing an earnings surprise of -103.85% [1] - The company posted revenues of $1.01 billion for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 3.70%, and up from $693.79 million in the same quarter last year [2] - Over the last four quarters, Helmerich & Payne has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Market Context - Helmerich & Payne shares have declined approximately 13.1% since the beginning of the year, contrasting with the S&P 500's gain of 14.5% [3] - The Zacks Industry Rank indicates that the Oil and Gas - Drilling sector is currently in the bottom 11% of over 250 Zacks industries, suggesting potential challenges for the company's stock performance [8] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.19 on revenues of $953.07 million, and for the current fiscal year, it is $0.73 on revenues of $3.81 billion [7] - The estimate revisions trend for Helmerich & Payne was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6]

Core Insights - Seadrill reported a quarterly loss of $0.17 per share, missing the Zacks Consensus Estimate of $0.26, and a significant decline from earnings of $0.49 per share a year ago, resulting in an earnings surprise of -165.38% [1] - The company generated revenues of $363 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 10.33% and showing a year-over-year increase from $354 million [2] - Seadrill shares have declined approximately 20.6% year-to-date, contrasting with the S&P 500's gain of 15.1% [3] Financial Performance - Over the last four quarters, Seadrill has surpassed consensus EPS estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is $0.01 on revenues of $308 million, while for the current fiscal year, it is projected at -$0.63 on revenues of $1.35 billion [7] Industry Outlook - The Oil and Gas - Drilling industry, to which Seadrill belongs, is currently ranked in the bottom 10% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Seadrill's stock performance [5][6]

Core Viewpoint - Valaris Limited reported quarterly earnings of $2.65 per share, significantly exceeding the Zacks Consensus Estimate of $1 per share, marking an earnings surprise of +165.00% compared to $0.88 per share a year ago [1][2] Financial Performance - The company achieved revenues of $595.7 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.56%, although this represents a decline from year-ago revenues of $643.1 million [2] - Over the last four quarters, Valaris has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Valaris shares have increased approximately 27.7% since the beginning of the year, outperforming the S&P 500's gain of 17.2% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with current consensus EPS estimates at $0.33 for the coming quarter and $2.41 for the current fiscal year [7] - The Zacks Rank for Valaris is currently 5 (Strong Sell), indicating expectations of underperformance in the near future due to unfavorable estimate revisions prior to the earnings release [6] Industry Context - The Oil and Gas - Drilling industry, to which Valaris belongs, is currently ranked in the bottom 7% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Helmerich & Payne, is expected to report a significant year-over-year earnings decline of -65.8% in its upcoming results [9]

Core Insights - Transocean reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.04 per share, compared to break-even earnings per share a year ago, representing an earnings surprise of +50.00% [1] - The company posted revenues of $1.03 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.12% and showing an increase from $948 million in the same quarter last year [2] - Transocean has surpassed consensus EPS estimates three times over the last four quarters, indicating a positive trend in earnings performance [2] Earnings Outlook - The sustainability of Transocean's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3] - The current consensus EPS estimate for the upcoming quarter is $0.07 on revenues of $1.03 billion, and for the current fiscal year, it is $0.02 on revenues of $3.93 billion [7] Industry Context - The Oil and Gas - Drilling industry, to which Transocean belongs, is currently ranked in the bottom 7% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]

Industry Overview - The Zacks Oil and Gas - Drilling industry includes companies that provide rigs and services for oil and gas exploration and development on a contractual basis [2] - Drilling for hydrocarbons is costly and technically challenging, with future prospects primarily dependent on contracting activity and rig availability rather than oil or gas prices [2] - Offshore drilling companies experience higher volatility compared to onshore counterparts, with their share prices more closely correlated to oil prices [2] Current Market Conditions - The industry is currently facing uncertainty and volatility due to cautious customer spending, geopolitical risks, and fluctuating oil prices [1][3] - Contracting activity has slowed, with operators deferring work to maintain capital discipline, impacting near-term earnings visibility [3] - Day rates have decreased from previous highs, and rig utilization is expected to bottom in the mid-80% range before recovery [5] Long-Term Outlook - A structural rise in LNG demand is anticipated to drive drilling activity, particularly from 2026 onward, providing a more stable outlook for drillers [1][4] - The global expansion of LNG is expected to support rig utilization and long-cycle contracts tied to offshore basins [1][4] Industry Performance - The Zacks Oil and Gas - Drilling industry ranks 210 out of 244 Zacks industries, placing it in the bottom 14% [6][7] - The industry's earnings estimates for 2025 have decreased by 94.6% over the past year, and estimates for 2026 have fallen by 66% [9][8] - Over the past year, the industry has declined by 20%, underperforming the broader Zacks Oil - Energy sector, which increased by 5.7%, and the S&P 500, which gained 20.2% [10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 5.50X, significantly lower than the S&P 500's 17.94X but above the sector's 5X [13][12] - Historical trading ranges for the industry show a high of 24.81X and a low of 4.97X over the past five years, with a median of 14.54X [13] Notable Companies - **Transocean**: A leading offshore drilling contractor with a focus on ultra-deepwater and harsh environment drilling, reported contract drilling revenues of $988 million for Q2 2025, a nearly 15% increase year-over-year [15][16] - **Helmerich & Payne**: The largest land drilling contractor in the U.S., known for its FlexRig fleet and advanced automation, has a market capitalization of $2 billion and has lost 33% in a year [18][20] - **Precision Drilling**: A top drilling rig contractor in Canada with operations in the U.S. and the Middle East, has a market capitalization of $743.3 million and has seen its earnings estimates for 2025 rise from $3.89 to $4.70 per share in the past 60 days [22][24]

Core Viewpoint - Transocean has shown a positive performance with a 5.2% increase in shares since the last earnings report, outperforming the S&P 500, but there are questions about whether this trend will continue leading up to the next earnings release [1][2]. Financial Performance - Transocean reported breakeven adjusted earnings per share for Q2 2025, surpassing the Zacks Consensus Estimate of a loss of 1 cent and improving from a loss of 15 cents in the same period last year [3]. - Total adjusted revenues reached $988 million, exceeding the Zacks Consensus Estimate of $968 million and reflecting a 14.8% increase from $861 million in the prior year [4]. - Revenues from ultra-deepwater floaters were $699 million, while harsh environment floaters contributed $289 million, both showing year-over-year increases from $606 million and $255 million, respectively [5]. Revenue Breakdown - Ultra-deepwater floaters accounted for 70.7% of net contract drilling revenues, while harsh environment floaters made up 29.3% [5]. - Revenue efficiency improved to 96.6%, up from 95.5% in the previous quarter, but slightly down from 96.9% in the year-ago quarter [6]. Operational Metrics - Average day rates increased to $458,600 from $438,300 in the prior year, although this figure missed the Zacks Consensus Estimate of $462,400 [7]. - Fleet utilization rate rose to 67.3%, up from 57.8% in the same period last year, with a total backlog of $7.2 billion as of June 2025 [8]. Costs and Capital Expenditures - Total costs and expenses were reported at $823 million, a 5.9% increase from $777 million in the previous year, with operations and maintenance costs rising to $599 million from $534 million [9]. - Capital investments for the second quarter amounted to $24 million, with cash used in operating activities at $128 million and cash and cash equivalents at $377 million as of June 30, 2025 [10]. Market Sentiment and Outlook - There has been a downward trend in estimates, with a 5.88% shift in the consensus estimate over the past month [12]. - Transocean holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [14]. Industry Comparison - Transocean is part of the Zacks Oil and Gas - Drilling industry, where Nabors Industries has gained 9.1% over the past month, reporting revenues of $832.79 million, a year-over-year increase of 13.3% [15].

Group 1: Earnings Performance - Helmerich & Payne reported quarterly earnings of $0.22 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, but down from $0.92 per share a year ago, representing an earnings surprise of +10.00% [1] - The company posted revenues of $1.04 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.17%, compared to revenues of $697.72 million in the same quarter last year [2] Group 2: Stock Performance and Outlook - Helmerich & Payne shares have declined approximately 51.3% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.14 on revenues of $968.96 million, and for the current fiscal year, it is $1.10 on revenues of $3.66 billion [7] Group 3: Industry Context - The Oil and Gas - Drilling industry, to which Helmerich & Payne belongs, is currently ranked in the bottom 15% of over 250 Zacks industries, indicating potential challenges for stock performance [8]