Thursday, September 9, 2010

Wells Fargo (NYSE:WFC) Initiates Coverage of Transocean (NYSE:RIG)

In the midst of the war of words with BP (NYSE:BP), Transocean (NYSE:RIG) has garnered the interest of Wells Fargo (NYSE:WFC), which has initiated coverage on the oil rig supplier.

Wells started Transocean off with an "Outperform," and a valuation range of $70-72.

The Wells Fargo analyst said, "We believe RIG has been oversold as a result of the uncertainty of direct and indirect liabilities stemming from the Macondo oil spill, estimating the current price incorporates over $5B in liabilities; we think it will be less than $1B. RIG is trading at a 20% discount to our NAV estimate including a $1B spill liability."

This would imply BP is going to take the brunt of the liabilities thought to be shared with Transocean and other oil companies having a connection to the Gulf oil spill.

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