Global Santa Fe (IL/A): Raising estimates and fair value to $58 - Goldman Sachs - September 15, 2005
We are raising our 06/07 EPS estimates to $3.79/$5.40 from $3.71/$4.90 based on increasing global jackup dayrates. Though we remain concerned about newbuilding activity longer term, the global jackup market remains undersupplied, suggesting that recent dayrate acceleration is sustainable. We believe that 300'+ jackups in the Gulf are being bid above >$100k. In addition, the HDHE jackup market is headed above $200k, bullish for GSF, which has the largest HDHE fleet globally. We are raising our fair value to $58 (10x 2006E EBITDA) from $56 =+34% upside. We are also lowering our 05 EPS to $1.59 from $1.67 driven by increased share count assumptions and the impact of Katrina. We continue to believe a KPC secondary offering remains a possibility. Maintain IL/A.
VALUATION.
On EV/EBITDA, GSF is trading at 7.5x our new 2006E EBITDA, in-line with the peer group average. However, on EV/DACF, GSF is at a 10% discount to the peer group. YTD, GSF shares are +31% vs. +37% for the peer group.
KEY DRIVERS OF CHANGES TO 2006E EPS.
Our changes to 2006 EPS are primarily driven by:
(1) +10% increase in average 2006 HDHE jackup dayrates (to $127k from $115k prior; +$0.09 positive EPS impact);
(2) +12% increase in average 2006 domestic <300' jackup dayrates (to $83k from $74k prior; +$0.05 positive EPS impact);
(3) +4% increase in average 2006 international >300' jackup dayrates (to $88k from $84k prior; +$0.04 positive EPS impact);
(4) +14% increase in average 2006 domestic >300' jackup dayrates (to $83k from $74k prior; +$0.04 positive EPS impact) and offset by
(5) increased share count assumption (-$0.09 negative impact) and
(6) 2% reduction in average 2006 floater dayrate, driven primarily by change in assumption on semi Grand Banks from $218k to $144k (-$0.04 negative impact). Changes to our 2007 estimates are driven primarily by increased jackup and floater dayrate assumptions.
KEY DRIVERS OF CHANGES TO 2005E EP.
Our changes to 2005 EPS are primarily driven by:
(1) increased Oil & Gas segment operating income (+$0.02 positive EPS impact) and offset by
(1) increased contract drilling expense assumptions, partially related to insurance deductibles following Katrina (-$0.04 negative EPS impact),
(2) increased share count assumptions (-$0.03 impact) and
(3) hurricane-related delays to rigs Arctic I, DD I and DD II (-$0.02).
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Jason Gilbert, Terry Darling. |
