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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: jim_p who wrote (65527)	5/1/2000 8:25:00 AM
From: Big Dog	Respond to of 95453

From Lehman on NE: Noble Drilling reported first quarter earnings per share of $0.19 compared with our $0.20 estimate. Earnings were up over 18% from the fourth quarter 1999. Solid first quarter performance was a result of continued utilization and dayrate improvements, particularly in the Gulf of Mexico and West Africa. Domestic drilling revenues climbed to 58% of the total up from 15% in the first quarter 1999. The Gulf of Mexico has been the strongest market with the greatest improvements in dayrates and utilization. The leading edge of the long-legged, 390-ft independent cantilever, jackups is showing the greatest strength with rates passing the $50,000 mark. The 300ft independent cantilever rigs have reached the mid-$30,000 rates and Nobel believes they could see the high $40,000's by year-end. The independent oil companies are attempting to lock-up Gulf jackups in long-term contracts. Noble has focused on maintaining its short contract status offering the greatest upside as the market improves. The West African rig market has shown solid improvements with utilization rates increasing, however with more modest increase in day rates. We expect that Noble will have signed all of its rigs into contracts in West Africa by this June. With the rapid tightening in the Gulf we would expect to see West African day rates strengthen later this year. Unlike the Gulf, we would not expect to see rates move into the $50,000 range until next year. The North Sea market has been the strongest in the shallow water segment over the deepwater rigs. Noble is currently starting a contract on the Tom van Langeveld for Conoco. Noble has contract commitments for all of its North Sea rigs. Day rates for jackups are strengthening but floater day rates remain weak. The deepwaters of Brazil will continue to imporve with the major oil companies moving down to fulfill new lease commitments. The Middle East has also showed solid demand with short-term jack-up contracts bidding in the low $30's and moving higher. Venezuela has been the weakest segment with little activity. Noble wants to maintain a presence in the region but contemplates moving one rig out of the market into better areas. On the upgrade front, Noble is completing the engineering analysis on both the Illion and Ferrington semisubmersibles. The upgrades to dynamically positioned 8,000-10,000 foot water depths would run about $175-200 million each. The company would consider such upgrades for a long-term (5 year) contact with a $160-175,000 day rate. We believe that ultimately there could be demand for this type of rig in the Gulf of Mexico or in the expanding West African market. The outlook for stronger than expected day rate improvements for jackups has led us to increase our 2001 estimates to $1.70 from $1.55. We continue our positive investment opinion on Noble Drilling shares. The company is well positioned to benefit from the improving shallow water markets within the Gulf of Mexico, as well as the ultimate recovery in the international markets. We maintain our outperform rating.