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

To: Post_Patrol who wrote (67857)	6/8/2000 9:43:00 AM
From: Big Dog	Read Replies (2) \| Respond to of 95453

From Dain this morning...Boom 2000 is getting close. Like the old slogan from ODB said: "You've never seen offshore like this before!" GLOBAL MARINE ANNOUNCES CONTRACT EXTENSIONS ON GULF OF MEXICO JACK- UPS We have revised upward our 2000 earnings estimate to $0.62 from $0.60 and our 2001 estimate to $1.28 from $1.22 to reflect the contract extensions on the Adriatic X, Main Pass IV, and the High Island 1. The jack-ups are all contracted to Coastal Corp. and the extensions and increased dayrates will commence between September and November of this year and expire at the end of May 2001. \|\| \|\|The affected rigs are all independent-leg cantilever (IC) jack-ups with water depth capability ranging from 250-300 feet. The dayrate increases were $33,000 for the Adriatic X, $30,500 for the Main Pass IV,and $20,000 for the High Island I. While all of the increases are significant, the $33,000 increase on a 300 foot water depth capability MLT 116-C jack-up is particularly dramatic and is testament to the tightness in the higher- specification jack-up sector. Additionally, the duration of the contract extensions?between 7-9 months?is somewhat longer than we have observed in recent fixtures and is likely a reflection of the operator's concern about dwindling rig supply and the associated increase in dayrates that inevitably occurs. U.S. Gulf utilization for all jack-up rigs capable of drilling in 250 feet of water and greater is currently approximately 93%. The 97%-100% utilization level on IC jack-ups of the same water depth capability is particularly compelling. \|\| \|\|The acceleration in dayrates is attributable to the U.S. Gulf of Mexico natural gas play, which is being driven by significant current and anticipated increases in demand combined with unusually low inventories. Although we expect to continue to observe fluctuations in the price of natural gas, the fundamentals remain strong and we are confident that we will see more announcements like Global's as jack-ups roll off their current contracts. \|\| \|\|While we believe the Gulf of Mexico gas play will favorably impact the entire jack-up fleet, the earnings leverage afforded U.S. Gulf-focused companies with premium equipment should be relatively better. This announcement bodes well not only for Global but also for drillers such as Rowan and Ensco. Stock Opinion We continue to rate Global Marine Buy-Average with a 12-month price target of $27, which is derived from discounting peak earnings of $2.52 at 15% from 2003 and placing an industry group multiple of 16x. Although the company's domestic jackups and turnkey division, ADTI, provides the company with leverage to upside earnings, the company is also well poised to participate in the West African recovery that could start as early as first quarter 2000.