Jefferies Forecasts Strong Improvement In Offshore Drilling; Favorites Include ESV And RDC

Jefferies reports that although it forecasts a strong improvement in offshore drilling activity in 2011, “we believe the offshore drillers will have difficulty sustaining the recent rally due to various headwinds.” Conversely, Jefferies believes the OSV sector may be finally poised to outperform. “With a steady supply of new build orders still being delivered and limited EPS growth or upside opportunities for the offshore drillers, we believe that stock selection will again be important in 2011,” Jefferies writes. “Our two favorites are Ensco plc ESV and Rowan Companies, Inc. RDC due to a combination of valuation and EPS growth in 2012. Within the OSV sector, our favorite name is Tidewater Inc. TDW.” Ensco closed Monday at $51.13; Rowan closed at $33.41; and Tidewater Inc. closed at $54.34.