Energy Prospectus

NEW YORK | Tue Mar 1, 2011 9:48am EST

NEW YORK (Reuters) - Shares of oil and gas drillers Ensco Plc (ESV.N), Diamond Offshore Drilling (DO.N), Noble Corp (NE.N) and Transocean Ltd (RIG.N) (RIGN.VX) extended their rally on Tuesday, the day after the United States approved a deepwater drilling permit.

U.S. regulators granted Noble Energy Inc (NBL.N) the first deepwater drilling permit since the BP Plc's (BP.L) Macondo well blew out last year, causing the worst-ever oil disaster in the Gulf of Mexico.

A moratorium on deepwater drilling was lifted last October, but no new permits had been issued till Monday. Analysts said the move could lead to a reopening of the deepwater region and approval of the more than half a dozen other permits.

"For now, we remain cautiously optimistic and believe a pickup in activity will be gradual," UBS analyst Angie Sedita said in a note to investors.

Shares of Ensco, which will drill the Noble Energy well, rose 1.8 percent to $57.11. Diamond Offshore climbed 1.8 percent to $79.69, Noble Corp rose 2.6 percent to $45.89, and Transocean firmed 0.6 percent to $85.14.

Noble Energy, which hit a 52-week high on Monday, dipped 0.4 percent to $92.26.

A note today from Global Hunter on offshore rig rates:

"Petrobras tenders shows how competitive the market is and the lid that will remain on UDW dayrates.
Market sources indicate Transocean (RIG; $85.35; $72 PT; Reduce) was the low bidder in the one or more DP units capable of working in
>1,500M (4,921’) with availability in 2011 for either 3-yr +3-yr option or 5-yr + 5-yr option contracts.
l RIG was the low bidder on both opportunities, offering the Sedco Energy and Sedco Express (both 5th gen. semis) at $414K/d per rig. While
not disclosed, PBR typically offers performance bonuses of between 10% and 15%.
l The rate is above the two most recent Brazilian floater fixtures, both of which were 5th gen semis: (1) Ensco’s (ESV; $56.96; $60 PT;
Accumulate) ENSCO 7500 contracted at $320K/d for 2-1/2 years and Noble’s (NE; $44.92; $40 PT; Neutral) Clyde Boudreaux, a non-DP
semi, at $290K/d for 1-yr.
l Interestingly, RIG undercut several newbuilds with near-term availability and weaker capital structures, including Petroserv with the SSV
Catarina (6th gen. semi), Ocean Rig offering newbuild drillships Ocean Rig Mukonos and Ocean Rig Corcovado, Pacific Drilling with the
newbuild drillship Pacific Mistral, and Grupo R with the newbuild La Muralla IV. Songa (SONG.NO; NOK 32.80; Not Rated), Seadrill (SDRL;
$37.56; Not Rated), and Pride (PDE; $42.73; Neutral; N/A PT) also bid newbuilds into the tender.
l The contracts don’t do much to our estimates as the rates are in-line with our leading edge forecast, but PR’ing the awards could give the
stock a trading move given the anticipation of this tender (note ESV moved 5% when it PR’d its PBR award, which was likely a factor of 1)
winning the contract and 2) establishing a footprint in Brazil).
l However, we have a tough time getting excited as 10 rigs bid for the work all with near-term availability and all the newbuilds were near $450k/
d bids, indicating the level of capacity that has to be soaked up in order to get rates to move in the space."