UPDATE: Susquehanna International Group Reiterates on Transocean on Updated MLP Model

In a report published Tuesday, Susquehanna International Group analyst Charles P. Minervino reiterated a Neutral rating on Transocean (NYSE: RIG), and raised the price target from $54.00 to $60.00.

In the report, Susquehanna International Group noted, “We have updated our Transocean MLP (RGLP) model with added functionality that allows the user to select any combination of ultra-deepwater rigs and automatically view the valuation impact from an MLP. Furthermore, we have narrowed the list of ultra-deepwater rigs that we believe are eligible for an MLP to take into account rigs that may be restricted due to Transocean's Macondo settlement with the U.S. Department of Justice. Our basic assumptions remain unchanged: Transocean will initially place three ultra-deepwater rigs into RGLP, and the MLP will trade at a similar yield as SDLP (~5.2%). We calculate an MLP of three rigs adds $6-$7/share of value; for comparative purposes, the Alerian MLP index (AMLP) trades at a 6.1% yield, which would imply roughly $1.50/share less value for RGLP. The IPO of an MLP is subject to the approval of Transocean's board.”

Transocean closed on Monday at $55.37.