Uncommitted Rig Days For Offshore Drillers Seen As Plus

In light of rising dayrates, it may be desirable for offshore drillers to have their glasses more than half-empty, in terms of available contract days, than half-full. True, conventional wisdom suggests a high percentage of contracted rig days typically results in much greater earnings visibility for offshore drillers. However, at least one analyst contends that a high proportion of uncontracted days should also be viewed as a positive indicator of greater potential earnings upside, particularly in improving deeper offshore markets. "In the deepwater and midwater markets, we view having a greater number of days available for contract as a positive, as we still believe upside exists for dayrates in these markets," says Angeline M. Sedita, oil-service and drilling analyst for Lehman Brothers in New York. She notes that in these markets, Diamond Offshore has the most available days for contract in both 2008 and 2009. In 2009, Noble has a similar level of uncontracted days. "Consequently, both these companies have greater earnings-upside-revision potential than some of their peers." For more on this, see the August issue of Oil and Gas Investor. For a subscription, call 713-260-6441.