Global Santa Fe, Transocean Merger

Discussion in 'Stocks' started by vicorly, Jul 23, 2007.

  1. vicorly


    does anyone know how i can trade the GSF RIG merger, what the correct ratio or formula would be? how did you arrive at the numbers?
  2. aresky


    7 May 2008
    Oilfield Equipment & Services (Citi)

    Transocean Inc (RIG)
    No End in Sight for Deepwater Upcycle

    * Another Leg Up in Rates- - Deepwater rig demand appears
    set to exceed supply for the next several years, suggesting
    another leg up in rates is likely. As has been the case,
    rigs with prompt availability should lead the way in
    setting the leading edge. Two of RIG's high-spec floaters
    have availability prior to 2010.
    * Jackup Market Continues to Surprise With Its Strength -
    Several regions appear short of capacity this year, which
    has helped to support rates at very attractive levels.

    * Additional Asset Sales Appear Likely - RIG is evaluating
    offers for its two North Sea semis to be sold as part of
    the GlobalSantaFe merger agreement. Future one-off sales
    will likely focused on low end jackups, several of which
    are currently working offshore Egypt, as RIG seeks to
    high-grade its fleet.
    * Raising Estimates and Target Price - We are raising our
    2008, 2009, and 2010 EPS estimates to $13.65, $16.20, and
    $18.75, respectively, from $12.50, $16.00, and $18.55. We
    are also raising our target price to $197 from $179,
    primarily to reflect an increase in our target multiple
    given the unprecedented strength of the worldwide floating
    rig market. We reiterate our BUY rating.

    Merger integration is progressing on schedule. Transocean believes the $150
    million in annual merger synergies it assumed at the time of the
    GlobalSantaFe merger are still achievable and likely to occur in 2010.

    Contract drilling revenues of $2.64 billion exceeded our forecast by $245
    million due to higher than expected average utilization of 91% versus our 84%
    forecast, which more than offset a slight average day rate shortfall of
    $230,000 versus our $232,700 estimate. In the company's key high-
    specification floater segment, average utilization and day rate of 90% and
    $340,900, respectively, exceeded our 87% and $334,100 estimate. Revenue
    efficiency (actual contract drilling revenue divided by maximum potential
    contract drilling revenue) was 95.8% in the first quarter, in line with the
    2007 average but up from a 94.9% average in 2006.

    We are raising our 2009 and 2010 EPS estimates to $16.20 and $18.75,
    respectively, from $16.00 and $18.55 due to higher day rates resulting from
    contract cost escalation provisions as well as a lower than expected share
    count. We are also increasing our target price to $197 from $179.
  3. aresky


    Transocean Inc
    Symbol: RIG
    Recent Price : $156.92
    Recommendation: Buy
    RIG posts Q1 EPS of $3.71 vs. $2.62, $0.32 above our estimate. Results were led by improving dayrates for
    the company's floaters and jackups, and lower-than-expected operating expenses (due to deferral of
    certain shipyard projects into Q2 or later) had the effect of raising utilization as well.We think the
    company will continue to benefit from rising deepwater demand, including rising demand from India, and
    we believe jackup demand looks strong, at least in the near term.
    Based on updated relative valuation
    metrics, we are lifting our 12-month target price by $18 to $182.
    S. Glickman
    05/07/2008 11:01:04

    May 07, 2008
  4. aresky


  5. aresky


  6. aresky


    08-May-08 11:59 ET In Play Transocean tgt upped to $182 at FBR -Update : Friedman & Billings raises their RIG tgt to $182 from $172 following yesterday's above consensus EPS report. Firm believes RIG is well positioned to benefit from the increase in deepwater exploration needed to meet the world's hydrocarbon needs. Based on recent leading-edge contracts at record rates with impressive terms, they believe there is more visibility into the duration of this cycle.

  7. aresky


    The companies are among those that investment bank Dahlman Rose said it expects to benefit from an uptick in drilling rates in the coming years.

    National oil companies have been locking in drilling contracts in recent months while most publicly traded oil majors "have been waiting on the sidelines," analyst Omar Nokta wrote in a client note."Now, with limited availability and record high leading edge rates, they must combat declining reserves and production to satisfy stakeholder demands."

    Nokta and colleagues boosted their forecasts for average drilling rates by $50,000 per day, meaning that they now expect the priciest ships, which can operate in very deep water under harsh conditions, will fetch an average of $600,000 per day over the next three years.

    "We believe Transocean (RIG) stands to benefit the most from the tight deepwater market as it controls seven of the 16 ultra deepwater rigs available to market through the end 2010," Nokta wrote. "We expect the company to negotiate attractive contract terms that allow for substantial visibility deep into the next decade."
  8. aresky


  9. aresky


  10. aresky


    ``The oil majors have their backs against the wall as Petrobras has aggressively locked up significant rig capacity,'' said Omar Nokta, head of maritime research at Dahlman Rose & Co. in New York.

    Petrobras is negotiating for as many as 17 more vessels to probe the Tupi discovery and neighboring fields, said Bill Herbert, an analyst at Simmons & Co. International in Houston. The company already controls almost seven times as much capacity as the next biggest user of rigs that can drill in 7,500 feet of water, according to research by Dahlman Rose.

    U.S. and European oil companies probably will pay $50,000 more per day to lease deepwater rigs during the next three years because Petrobras has already contracted for so much of the worldwide fleet, Nokta said. Such units are designed to cope with high seas and hold equipment needed to bore beneath the seafloor and identify oil and gas deposits as much as 6 miles below the ocean surface.

    Exxon, BP

    Exxon Mobil, the world's biggest oil company, plans to begin drilling a Brazilian prospect known as BM-S-22 in the third quarter with a Seadrill Ltd. rig in 2,100-meter seas. New York-based Hess Corp. and Petrobras own stakes in the project.

    Record oil prices and cost cutting have made up for rising drilling expenses, Exxon Mobil spokesman Henry Hubble told investors on a May 1 conference call. First-quarter profit climbed to $28.62 per barrel of oil equivalent produced from $23.27 a year earlier. Irving, Texas-based Exxon Mobil doesn't disclose how much it spends on rigs.

    London-based BP had profit of $21.42 per barrel produced in the first quarter, up from $13.25 a year earlier. The company discovered oil last month 31,150 feet below the surface of the Gulf of Mexico in a prospect called Kodiak. BP doesn't report drilling costs.

    `Return to Balance'

    ``There's more demand than there are available rigs,'' BP spokesman Daren Beaudo said. ``We expect that over the next couple of years, the rig count will return to balance.''

    At Petrobras, net income per barrel jumped 88 percent to $18.24. The increase outpaced the gains of 23 percent at Exxon Mobil and 62 percent at BP.

    Petrobras has signed leases this year for six deepwater rigs, more than twice as many as any other producer, according to Dahlman Rose. The contracts have an average duration of five years and four months at rates of $410,000 to $580,000 a day.

    Exxon Mobil leased Seadrill's West Polaris unit last month for $600,000 a day, Nokta said. BP agreed on May 1 to pay $540,000 a day for a Pride International Inc. drillship, $60,000 a day more than the company committed to three months earlier for an identical Pride rig, he said.


    Petrobras plans to start pumping oil in the first quarter of 2009 from Tupi, the biggest find in the Americas since Mexico's 1976 discovery of the Cantarell field in the Gulf of Mexico. Petrobras also is evaluating as many as seven nearby fields, including the Carioca prospect, Gabrielli said.
    ``We could get very good deals at that time,'' Gabrielli said. ``We moved some of our contracts from $70,000 a day to $250,000 a day, which seemed like a very large increase back then, but now, of course, drilling rigs are $600,000 and $700,000 a day.''

    Petrobras is in talks with Transocean Inc., the world's biggest offshore driller, to extend leases as much as three years ahead of expiration, Robert Long, chief executive officer for the Houston-based contractor, said last week.

    bloomberg news May 15
    #10     May 15, 2008