Logging While Investing
OFS Weekly Analysis
Deepwater asset strength
37 pages. 29 Exhibits, 550KB
Link: sendspace.com
Excerpt:
Deepwater asset strength. DO has secured the second PetroMena semi - for
$490MM and thus for a total expected "finished" cost of ~$540MM - in another
testament to industry conviction in the deepwater outlook (and of DO's ambition to
upgrade its floater fleet at discounts to replacement cost). Deepwater floater fixtures
continue to support Contract Driller's optimism, with 3 fixtures in approximately 2
months near $500K or higher, including last week’s 3 year $496K fixture on RIG’s
Deepwater Horizon in the U.S. Gulf of Mexico (see Rig Bookings), exclusive of the
$410K on the first Petromena Rig - the Ocean Courage - on which DO honored the
original owner's contract terms with Petrobras.
Pre-announcement whiffs. Key Energy Services (KEG, NR) is likely to record an
EPS loss of ($0.19-0.23) versus 2Q09 EPS of ($0.15) and Consensus of ($0.15) on
activity and pricing weakness. In addition, KEG is recording a $155-170MM pre-tax
charge in 3Q09 largely to the write down of 250 well service rigs. The 3Q09 result
helps to firm up understanding that 3Q09 U.S. results are likely to be at least
somewhat worse for many service companies than 2Q09 - the U.S. natural gas rig
count was 5% lower sequentially and pricing averaged modestly lower, although cost
savings efforts should be a partial offset. The lackluster Canadian seasonal recovery
in 3Q - the rig count was up 100% sequentially which was in-line with the previous
five-year average despite the much lower starting point - and rains in Central Mexico
in September appear to set the stage for mixed North and Central Americas results.
Note we lowered our WFT 3Q09 forecast last Monday to $0.10 from $0.13 to reflect
issues in both Chicontepec and Burgos. Our formal earnings preview is to come next
week.
Our Take on the Group. We have been acknowledging that factors in the oilfield
service landscape have generally improved, supporting the group's move back up to
the 2009 highs of early June. However, we remain wary of (1) U.S. gas conditions,
as it is not simply related to transient issues, in our view; and (2) excessive optimism
related to recovery in the U.S. and growth internationally; and (3) that current
valuation leads some investors to require better visibility on earnings upside to 2010
estimates. All suggest a little more downside risk than upside potential very near
term, in our view. However, we are supportive medium term and see relative
opportunity in Diversified Services and deepwater offshore asset exposure.
==================
Pride International Inc (PDE)
Lowering 2010 Estimate on Delayed Rig Start Up Dates
13 pages, 173 KB
citigroupgeo.com
Delayed Start-ups Impact 2010 EPS — Pride announced that the deepwater
newbuilds Deep Ocean Ascension and Deep Ocean Clarion will commence
operations in July 2010 and January 2011, respectively. This representas a
delay of 2-3 months from the prior schedule and lowers our 2010 estimate to
$2.20, from $2.70. BP has asked for the provision of additional equipment on
the Ascension and Clarion and the modest dayrates increases are reflected in
the $488,000 per day and $549,000 per day, respectively.
Raising Target / Maintaining Rating — PDE 2010 eps are reduced on rig start-
up delays. We have rolled our valuation period forward one quarter following
completion of Q3’09, and our forward-12-month earnings estimate is lifted by
the significant ramp in 2011 PDE earnings that result from the arrival of three
newbuild deepwater rigs. Our new target price is $30, up from $28. Target
multiples are unchanged and we maintain or Hold High-Risk rating. The
company has yet to contract its fourth deepwater newbuild, and multiple
expansion may not occur until a firm commitment is secured.
Deepwater Conviction Intact — RIG, DO, and NE remain our favored picks in
the offshore drilling group. We believe the trio holds better value as PDE shares
(rising 86% since the beginning of the year) have outpaced RIG (up 77%), NE
(up 68%) and DO (up 60%). Premium assets and significant deepwater
leverage will enable PDE to appeal over time, but we believe the stock is fairly
valued after a sharp run-up in 2009. |
