AccessMyLibrary provides FREE access to millions of articles from top publications available through your library.
Original Source: FD (FAIR DISCLOSURE) WIRE
. Richard Hoffman, GlobalSantaFe Corp., VP, IR . Jon Marshall, GlobalSantaFe Corp., President & CEO . Matt Ralls, GlobalSantaFe Corp., EVP & COO
. Mike Dawson, GlobalSantaFe Corp., SVP & CFO . Marion Woolie, GlobalSantaFe Corp., SVP, Operations . Jim McCulloch, GlobalSantaFe Corp., SVP & General Counsel . Blake Simmons, Applied Drilling Technology Inc., President . Roger Hunt, GlobalSantaFe Corp., SVP, Marketing
Co. reported revenue of $574.8m and net income of $85.1m, or $0.35 per share. Mgt. expects to achieve increasing avg. day rates over coming quarters, from increases in leading edge day rates and contract rollovers. Q&A Focus: turnkey business, rig supply and demand, Development Drillers I and II.
A. Key Data From Call 1. 2Q05 revenue = $574.8m 2. 2Q05 net income = $85.1m 3. 2Q05 EPS (diluted) = $0.35 4. 2Q05 capex = $78.3m 5. 1H05 capex = $170.4m
S1. 2Q05 Market Environment and Trends (J.M) 1. 2Q05 Highlights:
1. Revenue and earnings performance among best in co.'s history.
2. GSF will continue to benefit from exceptionally strong demand,
high rig utilization and accelerating day rates in all of
co.'s major drilling markets. 3. Positive macro trends that provide greater confidence in strength and duration of robust market: 1. Resilient world economy, in spite of continuing high oil prices. 2. Despite substantial increase in spending and activity levels over past 18 months to two years, there has been very little oil supply response. 3. Spending levels among customers continues to increase. 4. Seeing an increasing number of requests by customers for term contracts. 2. Day Rates: 1. Day rates secured over past few months have exceeded co.'s historical highs for all rig classes. 2. Recent contract work for Celtic Sea at a day rate of $325,000 is highest ever achieved for a fourth-generation semi. 3. Surging contracting activity in ultra deepwater segment has yielded new long term contracts for all drillships at
significantly higher rates. 4. Every indication that day rates will go higher than they are today; potential higher rates offer a lot of upside for GSF's future earnings. 5. GSF already has a substantial opportunity for earnings appreciation, just by getting rigs from current contract day rates up to the leading edge rates seen today. 6. With half of available rig time contracted in 2006 and only 15% booked in 2007, there is significant opportunity to capture higher day rates.
S2. 2Q05 Drilling Market Trends (M.R.) 1. Ultra Deepwater Contracts:
1. Market is surprisingly strong and is moving remarkably fast.
2. Within past four months, co. has signed all three ultra
deepwater drillships to term contracts in 2008 and 2009 at
increasingly favorable rates. 1. In April, co. bid the Jack Ryan to Totel (phonetic) for the APCO project in Nigeria with an initial contract term of two years at a day rate of approx. $300,000 per day starting in early 2007; and won that job. 2. In July, BP extended the Explorer contract from Dec. 2006 to Dec. 2008 at a day rate of $365,000. 3. Just last week, BHP extended its contract on the C.R. Luigs for an additional two years from 4Q06 to 4Q08 at a rate of $392,500 per day. 4. Combined, these three ultra deepwater contracts represent over $750m in contract backlog. 2. Exposure to Rising Day Rates: 1. Most of ultra deepwater fleet is now booked into 2008 and beyond at attractive day rates, but GSF still has significant exposure to rising rates across balance of fleet. 2. Of four midwater depth semis in North Sea, had avg. day rate at end of 2Q05 of around $80,000. 1. Believes the current market for this category of rig in that region to be closer to $225,000. 3. Four HDAT (phonetic) jackups had an avg. day rate at end of 2Q05 of about $91,000. 1. Expects the next fixtures in that market for that class of equipment to be around $200,000. 4. In West Africa, where co. currently operates nine of region's 19 active jackups, avg. day rate at end of 2Q05 for 116-C jackups was around $61,000. 1. Expects new fixtures at $120,000 or higher and above that level for the Baltic.
5. In Southeast Asia, avg. day rate at end of 2Q05 for seven
premium jackups in that market was around $66,000 a day. 1. Expects new fixtures to be above $100,000 and probably around $110,000 per day. 6. Has substantial future earnings growth ahead as fleet rolls from older contracts with lower day rates to new contracts reflecting current market conditions. 3. Current Fleet Activity: 1. Elected to reactivate Arctic II based on expected strong demand and rising day rates for North Sea semis. 2. Has committed Arctic II and Arctic IV for most of 2006 at day
rates commencing at $170,000-185,000 for 1H06, increasing to
$200,000 for 2H05. 3. For semi fleet outside North Sea, outlook is bright. 4. In Gulf of Mexico, growing demand and dwindling number of available rigs pushing prices higher. 5. In addition to Celtic Sea, Arctic I has returned from Venezuela for a one-year program at a rate of $165,000 per day. 1. In discussions with customers about follow-on work for both of those rigs. 6. Outside the Gulf, Aleutian Key will move from West Africa to Trinidad in 4Q05 for a ten-month program at a rate of $145,000.
7. Rig 135 will say with its …