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Vol. 10, No. 27 Week of July 03, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Drilling profits soar

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Second quarter company profits expected to rise by 20% on tight rig markets

Ray Tyson

Petroleum News Houston Correspondent

U.S.-based drilling contractors, after lagging the rest of industry through much of the run up in oil and gas prices, appear to be well on their way to the top, with 2005 second-quarter profits expected to increase nearly 20 percent on average from the previous quarter and a whopping four-fold compared to the same quarter last year.

The numbers are more amazing when considering that half of the 10 major drilling companies tracked by Petroleum News actually were losing money a year ago, when exploration and production companies were raking in cash on strong commodity prices but hesitant to expand drilling operations.

Another 35% in third quarter

However, an ever-tightening rig market on increasing energy demand and escalating day rates appear to have put both land and offshore contractors in the driver’s seat during the 2005 second quarter. Moreover, industry analysts now project company earnings on average will jump another 35 percent in the 2005 third quarter versus the second quarter.

Estimates for the 2005 second quarter and beyond represent mean earnings projections of analysts polled by Thompson-First Call. However, individual company estimates can be higher or lower than the consensus and tend to change as the reporting season approaches. Estimates also generally exclude one-time charges against earnings and other special items.

Contract drillers included in Petroleum News’ 2005 second-quarter survey are Transocean, Diamond Offshore, GlobalSantaFe, Rowan, Ensco International, Pride International, Nabors Industries, Parker Drilling, Noble and Grey Wolf.

Transocean, the world’s largest offshore drilling contractor, is expected to report a 2005 second-quarter profit of around 33 cents per share, up roughly 37 percent from 24 cents per share in the previous quarter and up three-fold from 8 cents per share in the year-ago quarter. The company is expected to earn about 46 cents per share in the upcoming third quarter, an increase of nearly 40 percent from this year’s second quarter.

GlobalSantaFe, another large offshore drilling company, could see a 2005 second-quarter profit of 27 cents per share, an increase of 28.6 percent from 21 cents per share in the prior quarter and a huge leap from the year-ago quarter, when the company lost 1 cent per share. Also, GlobalSantaFe is expected to earn around 50 cents per share in the 2005 third quarter, a whopping 85 percent increase from the second quarter.

Diamond is another offshore drilling contractor that has dug itself out of the red. Analysts expect the company to make about 29 cents per share in the 2005 second quarter, up 26 percent from 23 cents per share in the previous quarter and a loss of 8 cents per share a year ago. Additionally, Diamond is projected to earn 46 cents per share in the 2005 third quarter, a nearly 60 percent increase from the previous quarter.

Rowan, with its powerful fleet of relatively shallow-water jack-up rigs, is primed to earn about 31 cents per share in the 2005 second quarter. That would represent a 24 percent increase from 25 cents per share earned in the 2005 first quarter and another giant leap from the 2-cent-per-share loss registered in the year-ago quarter. The company also is expected to push its 2005 third-quarter profit to around 40 cents per share, a nearly 30 percent increase from this year’s second quarter.

A 35% gain likely for Ensco

Ensco, which also owns a fleet of powerful jack-ups capable of drilling to great depths, is expected to earn a 2005 second-quarter profit of about 35 cents per share. That would be a healthy 35 percent increase from 26 cents per share in the prior quarter and a nearly three-fold jump from 12 cents per share in the second quarter of 2004. Ensco is projected to earn about 46 cents per share in the 2005 third quarter, representing a roughly 30 percent increase from the second quarter.

Noble, primarily an offshore drilling contractor should see its 2005 second- quarter profit jump to 55 cents per share, an expected 66 percent increase from 33 cents per share in the previous quarter and more than a two-fold increase from 26 cents per share a year earlier. Company earnings also are expected to increase to 70 cents per share in the 2005 third quarter, a 27 percent increase from the previous quarter.

Nabors Industries, primarily a land drilling contractor, is expected to earn about 72 cents per share in the 2005 second quarter, a 10 percent decrease from 80 cents per share in the previous quarter but more than a two-fold increase from 30 cents per share a year earlier. The company also is projected to make 85 cents per share in the 2005 third quarter, an 18 percent increase over the previous quarter.

Parker, which has both onshore and offshore drilling rigs, is expected to post a slight decline in 2005 second-quarter earnings of about 4 cents per share, down from 5 cents per share in the preceding quarter but up from a 6 cent-per-share loss in the year-ago quarter. The company is expected to earn 5 cents per share in the 2005 third quarter, up one cent from the previous quarter.

Pride, which also provides both onshore and offshore rigs, could earn about 13 cents per share in the 2005 second quarter, representing a 30 percent bump from 10 cents per share in this year’s first quarter and a two-fold increase from 6 cents per share in the 2004 second quarter. The company is expected to earn a profit of roughly 22 cents per share in the 2005 third quarter, nearly doubling its second-quarter performance.

Grey Wolf, a strictly U.S land driller, is expected to earn about 11 cents per share in the 2005 second quarter, a slight increase over 10 cents per share in the previous quarter but a considerably better showing than a 1-cent-per-share loss in the year-ago period. The company could earn about 13 cents per share in the 2005 third quarter, an improvement of 2 cents per share from the previous quarter.

Service firms up 47% from last year

Meanwhile, a Petroleum News survey of major oilfield service companies Halliburton, Schlumberger, Baker Hughes, Weatherford International, National Oilwell Varco and McDermott International indicates the group on average should report 2005 second-quarter profits roughly flat to the previous quarter but up a healthy 47 percent from the same quarter last year. Moreover, earnings on average should increase about 12 percent in the 2005 third quarter compared to the second quarter.



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