GlobalSantaFe (IL/A): First Take - 3Q core operations in-line, fleet status suggests consensus too low - Goldman Sachs - November 02, 2005
Excluding 1x items (insurance deductible + Oil & Gas gain), GSF recurring 3Q05 EPS of $0.46 was in-line with our estimate + below consensus of $0.48, though several estimates appear not to have included hurricane impact. Core Contract drilling revenue was 1% above our estimate + expenses were in- line. Non-core turnkey + Oil & Gas operating income was below expectations on lower revenue + higher costs (-$0.04 impact), partially offset by higher other income + lower tax rate (+$0.03). Total EBITDA was 3% below our estimate. More importantly, GSF released a bullish fleet status after the close (details below), which we think suggests 10%+ upside to 2006 consensus EPS. We maintain our IL/A rating + $61 fair value (10x 2006E EV/EBITDA), or 37% upside potential.
GSF 3Q05 earnings call (719/457-2679 code: 273044) is Thurs at 11am EST.
TOPICS FOR CONFERENCE CALL.
(1) Mgmt view with respect to potential changes to mooring requirements in the US Gulf.
(2) Clarity on financial impact of hurricane damage to and delays in start of deepwater rigs Development Driller I and Development Driller II.
(3) Discussion of leading edge jackup dayrates in US Gulf and West Africa.
(4) Outlook for insurance premia.
(5) Discussion of outlook for newbuild activity and shipyard capacity.
(6) Uses of free cash.
TAKEAWAYS FROM GSF FLEET STATUS RELEASED AFTER THE CLOSE.
(1) 300' W. Africa jackup Adriatic 6 received a 9 month contract at a dayrate of $145k vs. our expectations of $115k-$120k.
(2) A new contract on the 300' Main Pass 4 at $100k-$110k and verification of an industry-reported contract on the 300' High Island 4 near $120k provide further confirmation of the surge in US Gulf jackup dayrates.
(3) Two deepwater rigs are moving to Brazil in 2007 for 3 year contracts. The 3,400' Arctic 1, currently in the US Gulf, will be starting early 2007 at a dayrate of $270k-$290k vs. our model at $200k. The 1,800' Arctic 4, currently in the North Sea, will be starting late 2007 at a dayrate of $240k-$260k vs. our model at $200k. We do not believe either rig will be working for Petrobras.
(4) GSF Rig 135, a 2,400' floater in W. Africa, received a 2 year commitment near $325k/day vs. our model at $210k. This data point is also bullish for PDE, which has the 1,000' PDE South Seas in W. Africa rolling off contract in mid-2006.
(5) GSF High Island II will be idle for an estimated 2 quarters due to hurricane damage, with each quarter down impacting EPS by -$0.02 to -$0.03.
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.
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Previous Goldman Sachs Research Notes on GlobalSantaFe:
Offshore Drillers: Raising estimates + fair values as day rates continue to surge - Goldman Sachs - October 04, 2005
Message 21761469
GlobalSantaFe (IL/A): Raising estimates + fair value to $52 Goldman Sachs July 11, 2005
Message 21494184
GlobalSantaFe (IL/A): 1Q2005 solid, raising estimates and fair value Goldman Sachs May 05, 2005
Message 21298936
GlobalSantaFe (IL/A): Raising estimates + est fair value to $44 on bullish fleet status Goldman - Sachs March 07, 2005
Message 21114147 |
