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

To: Dennis Roth who wrote (452)	5/8/2008 5:50:25 PM
From: Dennis Roth	Read Replies (1) \| Respond to of 454

Pride International (PDE): Strong 1Q08; deepwater assets still undervalued, maintain Buy - Goldman Sachs - May 1, 2008 United States What's changed Adjusted 1Q08 EPS of $0.71 was above our $0.67 estimate and consensus of $0.68. We are leaving are estimates unchanged as the negative impact of cold stacking of a jackup in Mexico (we were already assuming that one of the two rigs would be stacked) was offset by a lower tax rate. Implications We remain Buy-rated on Pride. Pride's deepwater assets are undervalued and we see upside optionality related to the separation of the company's Gulf of Mexico jackup fleet. (1) Management clearly stated that it expects further consolidation to occur and is open to all possibilities. At the same time, it stressed the value of its ongoing long-term strategy throughout the call, suggesting to us that Pride prefers to remain a stand-alone entity at current valuations. (2) PDE reorganized the Gulf of Mexico jackups under one management team to allow for a smooth transition. We believe that a separation is likely and would highlight the current relative discount assigned to PDE's floater fleet. (3) PDE secured a 5-yr contract at $539k/day for its last uncontracted newbuild drillship. While this rate is below leading edge rates (~$600k/day) recently secured by SeaDrill, it is 10% above the $490k/day Pride received for a similar rig in January. As part of the contract, Pride is modifying the design for a total rig cost of $725mm vs. $680mm originally. (4) Pride remains committed to growing its deepwater fleet and is maintaining balance sheet flexibility in order to pursue acquisition opportunities. Valuation Our $47 12-month price target is based on the mid-point of our sum-of-the-parts analysis. PDE trades at 7.4X/5.9X 2009E EV-DACF/EV-EBITDA, a 15%/18% discount to peer deepwater drillers DO and RIG. Key risks Risks include capacity additions or a decline in commodity prices.