In a new report, Deutsche Bank analyst Mike Urban explained why offshore drilling investors have reason for optimism. Despite talking share prices and a weak near-term demand outlook, Urban believes that offshore drillers remain a secular long-term growth story.
According to Urban, the consensus view that deep-water drilling is structurally flawed is misguided. Unfortunately for investors, the turnaround will not be happening any time soon. Deutsche Bank is projecting long-term (10-year) demand for 320 floating rigs versus only 225 currently active rigs.
However, demand weakness likely means that deep-water rig count has not yet bottomed. Urban projected that it could hit as low as 194 by the second half of 2016.
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