Pride Petroleum Services (PDE) Message Board

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Gold/Mining/Energy : Pride Petroleum Services (PDE)

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To: Dennis Roth who wrote (451)	4/22/2008 7:02:15 PM
From: Dennis Roth	Read Replies (1) of 454

Pride International (PDE): Pride would be a good fit for SeaDrill- reiterate Conviction Buy - Goldman Sachs - April 22, 2008 News This morning, Pride announced that SeaDrill through various forward contracts has acquired 9.9% of Pride’s outstanding common stock. Pride has lowered the threshold level of beneficial ownership for Seadrill that triggers the company’s stockholders rights plan from 15% to 10%. This announcement could lead to a formal offer; however, this is far from certain given SeaDrill’s reputation for numerous M&A discussions. Analysis We believe that strategically Pride and SeaDrill would fit well together. We also believe that a combined Seadrill and Pride would benefit from SeaDrill’s track record of aggressively negotiating contracts to achieve higher than average dayrates. Taking a look at historical M&A activity in the offshore driller space, three things are clear: (1) historically low premiums have been paid, (2) deals in the sector have occurred in bunches, and (3) deals tend to occur in upcycle conditions. Other than the RIG/GSF merger in July 2007 (no premium) and the HERO/Todco deal in March 2007 (28% premium) the last three major deals were: Pride acquisition of Marine Drilling in May 2001 at an 18% premium (12.5X LTM EBITDA), Transocean acquisition of R&B Falcon in August 2000 at a 15% premium (51X LTM EBITDA due to depressed results) and Santa Fe International/Global Marine in September 2001 at 9.2X LTM EBITDA. So in the past, deal premium has generally been in the 15-20% range. Implications We reiterate our Conviction Buy on Pride shares. We see upside to the $47 high-end of our sum-of-the parts value, which is based on current peer multiples, in an acquisition scenario. Pride trades at 83% of replacement cost vs. the peer group average of 118%. Our $45 12-month price target (8.5X 2009E EV/DACF) and estimates are unchanged. Risks include capacity additions or a decline in commodity prices.

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