Thursday, August 23, 2007

Lehman Boosts Targets For Offshore Drillers

Lehman Boosts Target Prices for Offshore Drillers, Favors Deepwater Companies

NEW YORK (AP) -- Shares of offshore drilling companies rose on Wednesday after a Lehman Brothers analyst raised price targets for several and forecast strong earnings for the sector, citing solid revenue and high demand for rig services.

Angeline Sedita estimated offshore drillers's earnings growth from 2007 to 2009 to range from 30 to 97 percent, with Rowan Cos. on the low end and Diamond Offshore Drilling Inc. on the high end.

Most offshore companies have about 55 to 70 percent of 2009 revenue locked into current contracts, Sedita noted, but there is still potential for substantial growth. Deepwater drillers, which perform drilling operations thousands of feet below the ocean floor, have the greatest potential for a rise in earnings, she said.

"We continue to favor companies with deepwater exposure given our belief of the long-term strength of the market," Sedita wrote, "and that demand will continue to outstrip rig supply, even with new rig construction."

Sedita initiated 2009 profit estimates for several companies, including Noble Corp. and Diamond Offshore, which she called "top picks." Sedita raised Diamond's price target to $125 from $103 and Noble's target to $124 from $98.

Diamond shares rose $4.38, or 4.8 percent, to $96.08 in afternoon trading. Noble shares rose $1.30, or 2.2 percent, to $59.47.

Sedita also raised Ensco International Inc.'s price target to $63 from $60; Pride International Inc.'s target to $43 from $39; and Rowan's target to $45 from $44.

Ensco shares rose $1.10, or 2 percent, to $55.81; Pride shares rose $1.45, or 4.5 percent, to $34.03; Rowan shares rose 67 cents to $36.

Lehman Brothers suspended price targets and ratings for GlobalSantaFe Corp. and TransOcean Inc., which are merging, because the firm is advising the former during the process.

GlobalSantaFe shares rose $2.29, or 3.5 percent, to $67.29; TransOcean shares rose $2.87, or 2.9 percent, to $100.86.

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