Deutsche Bank Initiates Coverage on Seahawk Drilling (HAWK) with a Hold; U.S. Natural Gas Outlook Remains Uncertain

November 16, 2009 7:28 AM EST

Deutsche Bank initiates coverage on Seahawk Drilling (Nasdaq: HAWK) with a Hold. Price target $30.

Deutsche analyst says, "HAWK is a shallow water drilling company with jackup rigs located in the Gulf of Mexico (GOM). After a sharp decline in demand that brought GOM jackup rig count to its lowest levels since the early days of the industry, demand and pricing appear to be bottoming. Having aggressively cut costs to weather the downturn, HAWK has significant earnings leverage to a recovery. That said, the US natural gas outlook remains uncertain and we see only a modest bounce in the GOM. We therefore initiate coverage of HAWK with a HOLD rating."

"After several rounds of M&A, the GOM commodity jackup is highly consolidated. HAWK controls roughly 35% of the market. When combined with market leader Hercules Offshore (Nasdaq: HERO), the top two companies have 72% share. Although this dynamic is of little benefit now given the over-supply situation in the shallow GOM, HAWK should benefit as the market recovers."

To see more analyst ratings on HAWK Click Here.

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