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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Second_Titan who wrote (173)	3/26/2001 3:22:24 PM
From: Big Dog	Respond to of 206338

From Dain: RIG:SB-Avg;REVISING EPS ESTIMATES Transocean Sedco Estimates Higher Costs: Pro forma for the merger with R&B Falcon Corporation, Transocean Sedco has budgeted higher repair and maintenance costs for its drilling rigs than we had originally anticipated. In addition, operating costs for the company's rigs appear to be higher than we expected. However, over the longer term, we believe operating costs will come down once Transocean Sedco determines potential cost savings associated with the merger. Drillship Discovery 534 Is Idle: The 7,000 foot drillship Discovery 534 is currently idle after completing a 60-day shipyard stint. The unit had been under contract in the Gulf of Mexico at a dayrate of $125,000-$130,000. Since there have not been any recent fixtures for a rig in this market, we believe a rate of at least $150,000 would be indicative of current market dynamics. Each month of downtime on the unit impacts earnings by approximately $0.01 per share. We are forecasting the rig will commence a contract in mid Q2. Transocean Sedco Plans To Dispose Of Several Assets This Year: Transocean Sedco plans to dispose of several assets throughout the year and expects to receive somewhere between $400 and $500 million in proceeds. Included in the assets held for sale are a couple of jackups and semisubmersibles as well as the company's land and barge drilling rigs in Venezuela. We have removed these units from our forecast upon conclusion of current contracts. Transocean Sedco Has Secured Several New Contracts: * Polar Pioneer--The 1,500 foot semisubmersible was awarded a six-month contract in the Norwegian sector of the North Sea at $132,000 starting in August. The rig is currently receiving a rate of $115,000. * Sedco 601 and Sedco 602--Both 1,500 feet semisubmersibles secured short- term work in Southeast Asia. The Sedco 601 received a three-month extension in Southeast Asia at a dayrate of $70,000, while the Sedco 602 received two short-term jobs at dayrates of $50,000 and $62,500. The Sedco 602 had previously been idle. * C. Kirk Rhein, Jr.--The 3,300 foot semisubmersible received a short-term contract in the Gulf of Mexico at a dayrate of $56,500, which is up from $42,500. * Trident 6--Upon conclusion of its shipyard program in September, the 220 foot jackup will commence a two-year job with Royal Dutch Petroleum Company/Shell (NYSE: RD; SB-Avg; $54.89) offshore Nigeria at a dayrate of $49,500. * Trident 8--The 300 foot jackup received a four-month contract offshore Nigeria at a dayrate of $55,000, which is up from its current contract dayrate of $29,500. * Randolph Yost--The 300 foot jackup was awarded a nine-month contract offshore Equatorial Guinea at a dayrate of $58,500. The rig is currently contracted at $26,500 through the end of this month. We Are Reducing Our EPS Forecasts: In an 8-K filed on March 23, 2001, the company said it expects 2001 EPS to be at the low end of the $1.33-$1.78 range given in January 2001. We are reducing our 2001 EPS estimate to $1.30, which is slightly lower than the company's guidance. We are reducing our 2002 EPS estimates slightly to $3.65 from $3.75. Stock Opinion We believe the deepwater market remains one of the best investment sectors for years to come. With the dominant position in the worldwide deepwater rig market, Transocean Sedco remains one of our top picks for the expanding deepwater market. Our price target of $80 is based on 7.5x replacement cycle EBITDA, which is a multiple that most offshore drillers traded to during the last upcycle. With the pending shortage of deepwater rigs, we believe investors will discount this outlook in the next 12-18 months. We maintain our Strong Buy-Average rating. Company Description Transocean Sedco Forex, Inc. is the world's largest and most experienced deepwater driller with operations in virtually all of the major world's offshore markets. The merger with R&B Falcon gives the company a dominant position in rigs rated to 5,000-foot-plus water depths and provides an attractive exposure to the strong Gulf of Mexico natural gas drilling market.