Dahlman Rose Gives Offshore Drilling Report On RIG, PDE

After carrying a cautious tone for several quarters with respect to ultra deepwater, Pride International PDE management has become very positive. Management highlighted several new projects in West Africa that it expects will tighten UDW capacity in the coming months and lead to firmer dayrates. Dahlman believes this outlook will support a shareholder rewards program, which should begin later in 2011 as it approaches final delivery of its newbuildings under construction. While Transocean's RIG management during the past 2 years has not been as cautious as Pride's, it is obvious that it is seeing stronger signs for the UDW market as well. It also sees steady midwater demand that should allow for some of its older units to remain employed, though there remains risk that standard deepwater units will cannibalize this business due to slower activity in that segment. Dahlman has a Hold rating on PDE and RIG PDE is trading lower at $33.10 RIG is trading higher at $65.34