Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Pride Petroleum Services (PDE) -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (440)	5/2/2006 7:03:09 AM
From: Dennis Roth	Respond to of 454

Pride International (U/A): Trading ahead of itself? - Goldman Sachs - May 01, 2006 We are lowering our 2006E EPS for Pride to $2.05 from $2.16 due to increased shipyard time in 2H06 and higher cost inflation assumptions. Despite investigations into government payments, lack of progress on the sale of LA Land and delays in SEC filings, PDE shares have ouperformed the peer group by +6% in April. PDE now trades at a 2% discount to the group on 2007 EV/DACF vs. a 20% discount historically. In part, we believe speculation about industry merger activity continues to support the stock. We are raising our fair value to $36 (7.0x new 2007E DACF) from $35 = +3% upside. We are keeping our 2007E EPS unchanged at $3.92 as we expect higher dayrates to be offset by continued cost inflation in wages and insurance coverage, and introducing our 2008E EPS of $5.20. Maintain U/A. PRIDE IS TRADING NEAR PARITY WITH PEER AVERAGE MULTIPLE While we believe some multiple expansion is merited by PDE mgt's success in deleveraging the balance sheet and improving operations, we think it is premature for PDE to be trading at a multiple at par with the peer average. On 2007E EV/DACF, Pride currently trades at a 2% discount to the peer group vs. a historical upcycle average 20% discount. On 2007E EV/EBITDA, PDE trades at 5.0x, an 11% discount to the group, vs. a 23% discount historically. PDE shares have outperformed the peer group by 6% over the last month. While we do believe PDE has the ability to unlock value through the separation of LA Land - our sum-of-parts math suggests valuations up to the low $40 range - we do not believe a separation is imminent. We would rather own closest peers NE (OP/A) and GSF (IL/A), which trade at parity and have less execution risk. SOLID 1Q06 Net of a gain on sale, Pride recurring 1Q06 EPS of $0.30 was above GS and consensus $0.29. Total revenue was 5% above our expectation driven by US Gulf but was mostly offset by 4% higher operating/S,G&A expense. Consolidated EBITDA was $9mm above our estimate (+$0.03 EPS variance), offset by tax rate (-$0.01) and share count (-$0.01). WHAT TO WATCH FOR (1) Investigation of payments to foreign government officials. (2) Announcement of term contracts on Pride Tennessee, South Pacific and South Atlantic. (3) Y/Y drilling expense increase expected to remain in the 15% range, with total operating cost inflation at +8%. (4) SG&A guided $8mm higher in 2Q to account for investigation-related fees; (5) Capex guidance revised to $310mm from $290mm. (6) 2006 2Q EPS guidance at $0.32-0.36; FY2006 EPS revised downwards to $2.04-$2.10 from $2.10-$2.16, inclusive of FAS 123R impact. (7) Timing of the potential divestiture of Lat. Am. businesses. IMPLICATIONS FOR THE INDUSTRY (1) Pemex's bid for three 300' ICs and their pending contract renewals on 12 jackups will likely further decrease the GOM rig count. (2) Mgt believes the disparity between GOM and international day rates will narrow as more fleets migrate away from the region. WE LOWERED OUR 2006E EPS TO $2.05 FROM $2.16 Key drivers of change to our EPS include: (1) increased GOM drilling dayrate assumptions (+$0.05 EPS impact) offset by (2) increased drilling expense assumptions and longer shipyard downtime, primarily in Eastern Hemisphere (-$0.05) and Western Hemisphere (-$0.06) segments, (3) increased SG&A and depreciation (-$0.06) and (4) a higher sharecount assumption (-$0.09). Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Jason Gilbert, Daniel Henriques. ================= Pride International (U/A): First Take - Solid quarter but nothing to justify recent outperformance April 28, 2006 Net of a gain on sale, Pride Intl recurring 1Q06 EPS of $0.30 was above GS and consensus $0.29. Total revenue was 5% above our expectation driven by US Gulf but was mostly offset by 4% higher operating/S,G&A expense. Consolidated EBITDA was $9mm above our estimate (+$0.03 EPS variance), offset by tax rate (-$0.01) and share count (-$0.01). Key topics for the call include: (1) investigation of payments to foreign government officials and (2) timing on the potential separation of the land segment. We believe PDE has outperformed recently on speculation of M&A activity, as well as the potential for the sale of the LA Land segment. We need clarity on these issues before revisiting our position on the stock. Fleet status report yesterday contained a number of new shipyard projects, but we are waiting until after the conference call to adjust estimates. Maintain U/A. CONFERENCE CALL INFORMATION: Today, Friday, April 28 at 10am EST. Dial-in (888) 455-0664. Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Jason Gilbert, Daniel Henriques.