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

To: Evolution who wrote (67133)	5/26/2000 8:23:00 AM
From: Big Dog	Respond to of 95453

Dain upgrades Rowan. RDC:B-Aggr;UPGRADING ROWAN COMPANIES TO BUY-AGGRESSIVE The data are compelling: \|\|Natural gas storage has fallen to below five-year average levels and is currently approximately 400 Bcf below last year at this time. A comfortable inventory of stored natural gas comprises about 3 Tcf prior to the net withdrawal months of November through March. It currently stands at 1.2 Tcf, implying a requirement to store approximately 75 Bcf per week until November. Injections to storage this week were 55 Bcf. \|\|Demand is projected to increase, conservatively, 2% from last year due to requirements from gas-powered generation plants coming on line. A hot summer is also reckoned. \|\|Aggregate production, or 'deliverability' in industry parlance, is estimated to be 3%-4% less than last year. \|\|Front-month contracts on gas currently exceed $4/Mcf. \|\| \|\|While the numbers may vacillate from period to period and source to source, the leitmotif is clear: demand continues to exceed supply. The solution is to increase production, which ultimately requires additional drilling. \|\| \|\|Rowan is a premium jack-up player with exceptional exposure, relative to its competitors, to the critical U.S. Gulf shelf and slope gas play. It currently has 19 of its 23 independent-leg rigs positioned to capitalize on increasing dayrates, with additional leverage provided by a new harsh-duty Gorilla class rig to be delivered in late 2000. Indeed, our industry sources have indicated that, given the current average Gulf jack-up utilization of about 89% and the persistent dire supply deficit and favorable pricing situation outlined above, we can expect to see dayrates on rigs capable of drilling in 350 feet of water approach $60,000 by the end of the year. \|\| \|\|Approximately 28% of U.S. natural gas production comes from the Gulf of Mexico shelf--one of the first locations the E&P industry looks to increase supply. \|\|At 89% utilization, the 131 jack-up rigs currently under contract in the Gulf of Mexico is at a 10-year high. \|\|Historically, dayrates have moved up dramatically once this utilization threshold is reached. \|\|Rowan is the best, most direct investment on this play. Stock Opinion We have raised our 2000 EPS estimate to $0.77 from $0.72 in anticipation of rapidly improving jack-up dayrates in the U.S. Gulf. Given the opinion of our industry sources, our 4Q00 dayrate estimate of $55,000 on rigs capable of drilling in 350 feet is conservative and offers even more upside potential to our current estimates. We have increased our 2001 EPS estimate to $1.65 from $1.33 on the expectation that dayrates for premium jack-ups in the Gulf will approach levels observed in 1997-1998 by the end of 2001. We have done extensive due diligence on dayrate/utilization trends and are comfortable with our 2001 estimate that is significantly above the Street estimate of $1.51. \|\| \|\|We have also established a 12-month price target of $41 by applying a multiple consistent with our sector valuations, 16x, to pro forma 2003 earnings, which have been discounted at 15%.

To: Evolution who wrote (67133)	5/26/2000 8:28:00 AM
From: stevedhu	Read Replies (3) \| Respond to of 95453

Evolution, if I'm not to late E&P-------Service EEX-------PKD PANA------FGH HEC-------GW RRC-------MIND CHK-------ICOC Thanks and Take Care Steve

To: Evolution who wrote (67133)	5/26/2000 8:38:00 AM
From: Frank	Respond to of 95453

Evolution -what a nice job! I am sure all my colleagues on the board are appreciative of your efforts. and , of course, thanks to Jim P also for being our leader in the contest-- Frank