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FBR Capital on Energy & Natural Resources/Offshore Drillers: Signs of Day Rate Improvement Continue

June 6, 2011 3:39 PM EDT
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Price: $6.25 --0%

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    15 Buy, 13 Hold, 14 Sell

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FBR Capital on Energy & Natural Resources/Offshore Drillers: Signs of Day Rate Improvement Continue

FBR analyst says, "This morning, June 6, 2011, Seadrill announced a fixture for the Offshore Resolute to drill three wells (plus options) in Bangladesh at a rate of roughly $134,000, which represents an improvement over all other fixtures for comparable rigs over the last three months.

Comparable Fixtures. The three most comparable fixture on the basis of rig specifications, contract region, and timing range between $119,000/day and $129,000, measurably lower than the $134,000 to be paid to Offshore Resolute.

PV Driller. In early April the PV Driller II, a 2009 built KFELS B Class (375ft Water Depth rated), was awarded one well extension at a contract rate of $119,000 per day.

West Juno. Later that month, the West Juno, a 2010 built KFELS B Class rig (375ft Water Depth rated), was awarded short-term contract at a $124,500 day rate.

Emerald Driller. Lastly, in May, the Emerald Driller, a Pacific Class 375, won its most recent contract to drill at $129,000 per day.

Industry Outlook. This fixture, and others like it, reaffirm our belief that the jackup market is on the verge of experiencing a healthy escalation in day rates. We expect additional incremental progress in rates this month and onward as jackup rates begin to move, particularly in the Latin American, West African and Asia/Pacific markets. Please see our analysis of the global jackup market entitled "Jackup Rates Set to Surge As Effective Utilization Tops 90%" which was published June 3, 2011.

Stocks of Note include: Transocean (NYSE: RIG), Whiting USA (NYSE: WHX), BreitBurn (Nasdaq: BBEP), W&T Offshore (NYSE: WTI), Patterson-UTI (Nasdaq: PTEN), Helmerich & Payne (NYSE: HP), QEP Resources (NYSE: QEP), Diamond Offshore (NYSE: DO), Gulf Island (Nasdaq: GIFI), and Enerplus (Nasdaq: ERF)


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