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					                                                                                                                North America Equity Research
                                                                                                                24 May 2010




Offshore Drillers
Lowering Offshore Driller Numbers as Deepwater
Costs Likely Climb

With changes to deepwater drilling clearly on they way, we’ve made our                                          Oilservice
first pass at quantifying the impact to the Oilfield Service industry. While                                    J. David Anderson, PE, CFA
                                                                                                                                                  AC
many of the potential changes will likely be positive in the medium and                                         (1-212) 622-6684
longer term, we see a number of negative implications for Offshore                                              jdavid.anderson@jpmchase.com
Drillers over the next several years, causing us to reduce our estimates and                                    Adam Aron
price targets for the group.                                                                                    (1-212) 622-0144
                                                                                                                adam.aron@jpmchase.com
• Looking toward the North Sea for guidance. The stricter
                                                                                                                Samantha Hoh, CFA
  environmental safety standards employed in the North Sea could be                                             (1-212) 622-5248
  adopted in the U.S. Gulf, potentially becoming best practice globally.                                        samantha.k.hoh@jpmchase.com
  Higher rated BOPs, acoustic sensors, more safety procedures, and                                              J.P. Morgan Securities Inc.
  greater testing frequency would all contribute to higher costs for drillers.
• Capital equipment increases of up to $20mm per rig. We estimate the
  worldwide fleet could need an additional 233 ram and 206 annular BOPs
  in order for every rig to have at least two 15kpsi ram and one 10kpsi
  annular BOP. This corresponds to about $5.5bn in capital expenditures or
  approximately $20mm/rig. The biggest question is the timing of
  spending as BOP manufacturers have limited capacity.
• Diamond, Pride, and Noble would be most impacted. Not
  surprisingly, older fleets would require the most capital improvements,
  crimping free cash flow in future years. We estimate Diamond's free cash
  flow could be reduced by as much as 22% in 2011 and 27% in 2012,
  putting its special dividend further at risk.
• Cutting estimates and price targets for the group. Taking into account
  lower utilization rates for down days, higher maintenance costs, and
  increased insurance premiums, we have trimmed our 2011/12 EPS
  estimates by 7%/6%. We expect increased capex requirements to
  collectively reduce return on capital by over 150bp over the same time
  period.
• Still cautious on Offshore Drillers, prefer HAL and SLB here.
  Demand for deepwater rigs remains weak, and leading edge dayrates are
  poised to move lower through the year. While shares of RIG are
  increasingly attractive, we still see downside risk. Instead, we would use
  market weakness as an opportunity to own HAL and SLB.

Equity Ratings and Price Targets
                                                              Mkt Cap                                  Rating                         Price Target
Company                                         Symbol          ($ mn)        Price($)                 Cur         Prev                 Cur           Prev
Diamond Offshore Drilling Inco                     DO         9,808.30          70.55                  UW           n/c               79.00          87.00
Ensco plc                                         ESV         5,524.07          38.76                  OW           n/c               52.00          60.00
Noble Corporation                                   NE        8,294.34          32.42                   N           n/c               42.00          49.00
Pride International Inc.                          PDE         4,416.75          25.15                   N           n/c               30.00          33.00
Transocean Ltd.                                    RIG       19,859.34          59.24                   N           n/c               80.00          87.00
Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 21 May 10.

See page 25 for analyst certification and important disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
J. David Anderson, PE, CFA     North America Equity Research
(1-212) 622-6684               24 May 2010
jdavid.anderson@jpmchase.com




                               Sorting Out the Winners and Losers
                               Everyone acknowledges that changes in the deepwater are on the way, but figuring
                               out the true financial impact to Oilfield Service stocks is daunting with so many
                               unknowns. While politicians and regulators wrangle with the consequences of the
                               Deepwater Horizon accident, we are starting to get a picture as to the potential
                               winners and losers over the next several years. But recognize that this is only our first
                               of many attempts at quantifying the impact to deepwater operations; this is simply
                               how we see it unfolding as of now.

                               • Losers – Offshore Drillers. Over the near to medium term, drillers are poised to
                                 see an increase in costs in maintenance, capital equipment, and insurance
                                 premiums. Furthermore, we expect utilization rates to be lower to account for
                                 increased down days related to maintenance and BOP testing. Collectively, we
                                 have lowered our 2011 earnings estimates by 7%, free cash flow by 15%, and
                                 return on capital trimmed by 130bp. Most impacted are Diamond, Noble, and
                                 Pride.
                               • Winners – Capital Equipment. On BOP upgrades alone, we see up to $5.5 bn in
                                 potential orders, while the aftermarket business for parts and service could easily
                                 double. Manufacturing capacity will be the limiting factor – Cameron, National
                                 Oilwell Varco, and Hydril (GE Oil and Gas) are the only BOP manufacturers.
                               • Probably a winner, but hard to say right now – Large Cap Service. The
                                 biggest near-term negative will likely be a more rigid permitting process to
                                 results in lower activity levels, but this should get worked out over time. Further
                                 out, we see increased technology for decreasing risk and a greater emphasis on
                                 quality control, which should be positives for the group. We also see a potential
                                 for greater services to enhance safety, such as more concrete plugs required. We
                                 haven’t adjusted our numbers for large cap service yet.

                               Over the longer term, we see deepwater changes as an overall positive for the oilfield
                               services industry, along with locking in a higher floor for oil prices. History has
                               shown that higher costs should eventually be passed along in the form of higher
                               dayrates from rig contractors and overall higher well costs. In the meantime,
                               predicting changes to regulations and practices is likely a futile exercise, but we'll try
                               anyway. We broadly see five changes to the industry over the next several years:

                               • Increased regulation and new procedures. We expect the permitting process to
                                 take considerably longer, while drilling operations will also likely lengthen with
                                 additional procedures to ensure safer drilling operations. Look toward the North
                                 Sea for a guide, which includes more concrete plugs in well design, among other
                                 things.
                               • Greater use of technologies to minimize risk. Over the past decade,
                                 technologies have focused on improving performance. This is likely to shift
                                 toward reducing risk.
                               • Changing mix of operators in the deepwater. Raising the strict liability limit
                                 for oil companies from $75mm to $10bn, as some have proposed, would
                                 effectively limit only the super majors from participating in the deepwater Gulf.

2
J. David Anderson, PE, CFA     North America Equity Research
(1-212) 622-6684               24 May 2010
jdavid.anderson@jpmchase.com




                                  We expect a limit short of $10bn, but this would undoubtedly change the
                                  economics for many smaller producers, leaving the deepwater to only the super
                                  majors and large independents.
                               • Higher insurance premiums. Rig contractors are likely to face a 20-30%
                                 increase in insurance premiums. While the spike in insurance premiums
                                 following Hurricane Katrina was short-lived and limited to the Gulf, the new rate
                                 increase is likely to linger longer and expand globally.
                               • Substantial build-out in capital equipment. We expect greater redundancy and
                                 increased capacity across the board for virtually every critical piece of equipment.
                                 The most obvious is the blowout preventers, which are likely to be retrofitted and
                                 replaced, in many cases. Furthermore, we would expect BOPs to be tested more
                                 frequently, likely doubling the annual maintenance costs for service and spare
                                 parts. Although many in the industry doubt the effectiveness of acoustic switches
                                 on BOPs, that is probably irrelevant—more is better, expect them to be mandated
                                 in the Gulf.

                               For the most part, we have difficulty quantifying the impact to large cap service
                               companies. Over the near and medium term, we are most concerned about delays
                               that may be incurred from an extended permitting process. But taking into account
                               that this will be limited to the Gulf of Mexico, service companies shouldn’t see too
                               much of an impact with their diversified revenue streams. We note that during
                               hurricane seasons, service company earnings are generally impacted by only a few
                               pennies per share. Furthermore, any reduced activity levels may be offset by an
                               increased reliance on technologies that reduce risk, along with a greater emphasis on
                               procedures that could potentially increase service company involvement.

                               We feel that we have a better handle on the impact to offshore drilling
                               contractors, which looks rather negative over the next few years. Not only will
                               contractors likely face higher costs on rising insurance premiums and increased
                               maintenance, but lower utilization rates are likely as well, particularly with BOPs to
                               be tested more frequently. Capital equipment requirements over the next several
                               years will likely be material, reducing free cash flow and lowering returns on capital.
                               We do not believe these changes will be limited to the Gulf of Mexico but are more
                               likely to become “best practice” on a global basis.




                                                                                                                     3
J. David Anderson, PE, CFA         North America Equity Research
(1-212) 622-6684                   24 May 2010
jdavid.anderson@jpmchase.com




                                   Table 1: Summary Changes to our Models
                                   EPS                     Before                                 After                         % Change
                                                2010E 2011E      2012E        2013E 2010E 2011E         2012E     2013E '11 y -y '12 y -y '13 y -y
                                   RIG          $8.09 $10.60 $11.39          $11.78  $7.92  $9.77 $10.55         $10.95     -8%      -7%      -7%
                                   DO            8.30   9.47     10.39        10.67   8.17   8.67        9.58      9.95     -9%      -8%      -7%
                                   PDE           1.57   3.17      4.65         4.93   1.52   2.84        4.32      4.60 -10%         -7%      -7%
                                   NE            5.51   5.63      6.16         5.99   5.46   5.37        5.88      5.71     -5%      -5%      -5%
                                   ESV           4.00   5.65      7.11         8.32   3.94   5.41        6.82      7.97     -4%      -4%      -4%
                                   Total       $27.48 $34.52 $39.69          $41.70 $27.01 $32.06 $37.15         $39.19     -7%      -6%      -6%

                                   Returns                     Before                              After                        % Change
                                                2010E      2011E     2012E    2013E   2010E   2011E      2012E    2013E '11 y -y '12 y -y '13 y -y
                                   RIG            10%        12%       13%      14%     10%     11%        12%      13%     -7%      -7%      -8%
                                   DO             28%        32%       35%      38%     28%     29%        30%      30%     -9% -14% -20%
                                   PDE             5%         9%       12%      12%      5%      8%        11%      11% -11%         -9% -10%
                                   NE             20%        20%       23%      23%     20%     19%        21%      21%     -5%      -7% -11%
                                   ESV            12%        15%       19%      23%     11%     15%        18%      22%     -4%      -4%      -4%
                                   Total          15%        18%       20%      22%     15%     16%        19%      19%     -7%      -9% -12%

                                   FCF                     Before                          After                                % Change
                                                2010E 2011E      2012E 2013E 2010E 2011E         2012E            2013E '11 y -y '12 y -y '13 y -y
                                   RIG         $2,594 $3,557 $4,773 $4,761 $2,567 $3,166 $4,257                  $4,094 -11% -11% -14%
                                   DO           1,092  1,225     1,668 1,674  1,083    960       1,226            1,132 -22% -27% -32%
                                   PDE           (978)  (127)      565   814   (982)  (261)        410              559 -105% -27% -31%
                                   NE             939  1,443     1,961 1,967    930  1,245       1,689            1,574 -14% -14% -20%
                                   ESV             21    585     1,097 1,255     22    561       1,063            1,207     -4%      -3%      -4%
                                   Total       $3,667 $6,682 $10,064 $10,472 $3,620 $5,672 $8,644                $8,566 -15% -14% -18%
                                   Source: J.P. Morgan estimates.


                                   The changes to our estimates are predicated on several assumptions, which are likely
                                   to change over the coming quarters – consider this our first iteration.

                                   • Lower utilization rates. We have cut our utilization rates for the industry by
                                     100bp to account for increased downtime related to maintenance procedures and
                                     increased safety testing. The most glaring example is BOP testing, which may
                                     now be done every 7 days instead of every 14 days. As the BOP is owned by the
                                     rig contractor, any downtime related to maintenance is likely to be incurred by
                                     the contractor. As a stress test, an additional 100bp decrease in utilization lowers
                                     2011/12 EPS by about 3% for the group.
                                   • Higher insurance premiums. Rig insurers indicate that insurance premiums
                                     could rise by as much as 20-30% across the board—and not just in the Gulf. In
                                     general, this works out to an incremental approximately $0.5 mm in costs per rig.
                                   • Increased maintenance costs. More stringent regulations will clearly focus on
We estimate equipment                maintaining equipment, stressing conservatism in the wake of this accident. Just
upgrades could add $10-20kpd,
                                     looking at BOPs, doubling up the testing would likely double the service and
while additional insurance
premium could add an additional      parts required.
$10kpd for a total cost increase
                                   • Capital equipment improvements. Redundancies and higher ratings for
on $20-30kpd.
                                     equipment across the board will likely become standard practice. Clearly this
                                     would be a huge positive for capital equipment companies, particularly Cameron
                                     and National Oilwell Varco, the two leading BOP manufacturers.


4
J. David Anderson, PE, CFA         North America Equity Research
(1-212) 622-6684                   24 May 2010
jdavid.anderson@jpmchase.com




                                   Start Placing Orders for BOPs
                                   With so much public attention on the blowout preventers, it seems clear that new
                                   standards and regulations will be established. Current designs for BOPs allow for
                                   shear rams to cut through drill pipe only, not joint, tools, or casing. We have long
                                   suspected that the Cameron BOP at Macondo has worked properly, but it may have
                                   encountered a much thicker drill pipe joint. One future solution would be to increase
                                   the shearing capacity of the ram, but this could also be solved by adding another
                                   shear ram. For our analysis, we look toward the harsh environment floaters in the
                                   North Sea as a guide.

                                   Table 2: Transocean Harsh Environment Floaters
                                                                                                                  Ram BOPs                      Annular BOPs
                                                                    Depth       Location        Year         # BOPs     Max Psi              # BOPs      Max psi
                                   Henry Goodrich                   5,000         US            2007            3       15,000                  1        10,000
                                   Transocean Leader                4,500       N. Sea          1997            2       15,000                  1        10,000
                                   Paul B. Loy d, Jr.               2,000       N. Sea          1990            2       15,000                  1        10,000
                                   Transocean Arctic                1,700       N. Sea          1986            2       15,000                  2        10,000
                                   Polar Pioneer                    1,500       N. Sea          1985            2       15,000                  1        10,000
                                   Harsh Floaters                   2,940                       1993           2.2      15,000                 1.2       10,000
                                   Source: Company documents, J.P. Morgan.


North Sea harsh environment        As shown above, Transocean’s harsh environment floaters have at least 2 ram and 1
floaters typically have at least   annular blowout preventer at maximum usable pressure of 15kpsi/10kpsi,
two 15kpsi ram BOPs and one        respectively. Therefore, if we assume this becomes the industry standard for
10kpsi annular BOP.
                                   deepwater drilling, companies with the newest fleets like ESV and SDRL would
                                   have limited capital equipment requirements as they have the highest pressure rated
                                   BOP stacks—recently built rigs have been outfitted with the latest equipment.
                                   Although annular BOPS are not used on all rigs, both ESV and SDRL have 15kpsi
                                   ram style double actuator BOPs and 10kpsi annular BOPs, when used. Additionally,
                                   since ESV's floater fleet is so new, the company’s rigs have an average of about 6
                                   ram BOPs per rig compared to the industry average of 2.3.

                                   Table 3: Floater BOP Statistics
                                                                                                  Ram BOPs                                  Annular BOPs
                                                    Av g. Depth           # Rigs      # BOPs      BOP / Rig       Av g Psi      # BOPs       BOP / Rig       Av g. psi
                                   RIG                5,440                 69          157          2.3          13,841           97            1.4          8,359
                                   DO                 4,207                 33          71           2.2          12,273           61            1.8          7,424
                                   NE                 7,163                 16          29           1.8          13,333           26            1.6          7,333
                                   PDE                6,238                 18          43           2.4          12,222           33            1.8          8,056
                                   ESV                8,438                  8          47           5.9          15,000           10            1.3         10,000
                                   SDRL               8,964                 14          37           2.6          15,000            3            0.2         10,000
                                   Rest of Industry   4,720                100          219          2.2          12,625          108           1.1           8,237
                                   Total Floaters     5,450                258          603          2.3          13,124          338            1.3          8,247
                                   Source: RigLogix, J.P. Morgan.
                                   Note: The majority of Ram style BOPs are the dual ram variety. The table above only lists rigs with BOP information available. For
                                   example, newbuild rigs that have not yet chosen a drilling package have been omitted.




                                                                                                                                                                         5
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     On the other hand, drilling contractors with older fleets have noticeably fewer BOPs
                                     per rig and lower pressure ratings. Diamond, Pride, and Noble stand out as drilling
Drilling contractors with an older
                                     contractors that may require substantial upgrades to their fleet’s blowout preventers.
fleet have noticeably fewer BOPs
per rig and lower pressure           Diamond has the oldest average fleet in the industry, and although some of this
ratings than companies with a        equipment has likely been upgraded periodically, our analysis shows the company
newer fleet. Diamond, Pride, and     still has fewer BOPs per rig than the industry average and one of the lowest
Noble stand out as drilling          maximum pressure ratings for both ram and annular style BOPs. Noble and Pride
contractors that may require
                                     also have lower average maximum BOP pressure ratings, and Noble has the fewest
substantial upgrades to their
fleet’s blowout preventers.          ram style BOPs per rig in our coverage universe. Although the recent newbuild rigs
                                     from these contractors will likely meet or exceed the potential increased BOP
                                     requirements, their older rigs would need substantial upgrades.

                                     In our analysis we have conservatively assumed the North Sea environmental safety
                                     standards with regards to BOPs become standard on the entire floater fleet. While
                                     some rigs working offshore West Africa (for example) may never require the
                                     environmental safety standards of the North Sea, this may eventually become
                                     industry standard. In other words, the timing of rig upgrades in less environmentally
                                     restricted areas will likely take longer.

                                     Table 3: Floaters that Require BOP Upgrades
                                                                            Ram BOPS (likely upgrades)         Annular BOPs (likely upgrades)
                                                            # rigs    # BOPs # Needed per Rig % BOPs       # BOPs # Needed per Rig % BOPs
                                     RIG                     69         157       34        0.5      22%      97        36       0.5       37%
                                     DO                      33          71       38        1.2      54%      61        31       0.9       51%
                                     NE                      16          29       12        0.8      41%      26        16       1.0       62%
                                     PDE                     18          43       30        1.7      70%      33        20       1.1       61%
                                     ESV                      8          47       0         0.0       0%      10        0        0.0       0%
                                     SDRL                    14          37       10        0.7      27%      3         11       0.8      367%
                                     Rest of Industry        100        219      109        1.1      50%     108        92       0.9       85%
                                     Total Floaters          258        603      233        0.9      39%     338       206       0.8       61%
                                     Source: RigLogix, J.P. Morgan.


                                     Assuming the entire floater fleet eventually has to be upgraded to a minimum of two
                                     15kpsi ram and one 10kpsi annular BOPs per rig, then 233 ram and 206 annular
Assuming the entire floater fleet
                                     BOPs would be required. This corresponds to almost one (0.9) added/upgraded ram
eventually has to be upgraded to
a minimum of two 15kpsi ram          BOP per rig and almost one (0.80) added/upgraded annular BOP per rig. Of the
and one 10kpsi annular BOPs          companies we cover, Pride, Diamond, and Noble would require the most new BOPs
per rig, then 233 ram and 206        to upgrade their fleet. Both Pride and Diamond would need at least an additional ram
annular BOPs would eventually        BOP per floater while needing approximately one more annular BOP as well to reach
be required.
                                     the standards we highlighted above. On the other hand, Ensco's floater fleet currently
                                     meets the requirements we anticipate and therefore would not need to upgrade BOPs
                                     to reach the harsh environment standards set in the North Sea region.

                                     Notably, a major drilling contractor we spoke to confirmed upgrading a BOP would
                                     most likely require the purchase of a new unit. Increasing maximum pressure
                                     capacity of these units tends to require a different design with larger rams, thicker
                                     seals, and a general larger footprint to be able to handle higher pressures. Therefore,
                                     assuming a completely new unit on all non-compliant rigs is likely the best
                                     assumption.




6
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Figure 1: Ram BOPs Needed                                                              Figure 2: Annular BOPs Needed
                                                           40                                      2.0                                                40                                        1.2




                                                                                                                              # Annular BOPs Needed




                                                                                                                                                                                                      # Annular BOPs / Rig
                                                                                                                                                                                                1.0




                                       # Ram BOPs Needed




                                                                                                         # Ram BOPs / Rig
                                                           30                                      1.5                                                30
                                                                                                                                                                                                0.8
                                                           20                                      1.0                                                20                                        0.6
                                                                                                                                                                                                0.4
                                                           10                                      0.5                                                10
                                                                                                                                                                                                0.2
                                                           0                                       0.0                                                0                                         0.0




                                                                                PDE
                                                                RIG
                                                                      DO




                                                                                            SDRL
                                                                           NE


                                                                                      ESV




                                                                                                                                                           RIG
                                                                                                                                                                 DO




                                                                                                                                                                                       SDRL
                                                                                                                                                                           PDE
                                                                                                                                                                      NE


                                                                                                                                                                                 ESV
                                                            # BOPs needed         BOPs needed / rig                                                    # BOPs needed        BOPs needed / rig
                                     Source: RigLogix, J.P. Morgan.                                                         Source: RigLogix, J.P. Morgan.




                                     Total capital expenditure impact to the offshore drillers
As a rough estimate we assume        As a rough estimate we assume that a new BOP costs approximately $1,000/psi or
that a new BOP costs                 $15 million for a new 15,000psi ram BOP and $10 million for a new 10,000psi
approximately $1,000/psi or $15      annular BOP. While it is possible that some of the existing BOPs could be upgraded,
million for a new 15,000psi ram
BOP and $10 million for a new
                                     we assume that most of the lower rated BOPs would have to be replaced. If we use
10,000psi annular BOP.               the North Sea as a guide, we estimate that the industry would have to spend
                                     approximately $5.5bn or about $20 million on average per rig to bring the current
                                     floater fleet up to standard (two 15kpsi ram, one 10kpsi annular).

                                     Table 4: Estimated Capital Required for Floater Fleet Upgrade
                                     Total Floaters                                Ram BOPS (est. upgrades)     Annular BOPs (est. upgrades)                                                        Total
                                                    # rigs                       # Cost per Total cost per Rig # Cost per Total cost per Rig                                                  Capex per Rig
                                     RIG             69                         34    $15     $510      $7.4   36     $10     $360      $5.2                                                   $870     $13
                                     DO              33                         38     15      570      17.3   31      10      310       9.4                                                    880       27
                                     NE              16                         12     15      180      11.3   16      10      160      10.0                                                    340       21
                                     PDE             18                         30     15      450      25.0   20      10      200      11.1                                                    650       36
                                     ESV              8                          0     15       0        0.0    0      10       0        0.0                                                     0         0
                                     SDRL            14                         10     15      150      10.7   11      10      110       7.9                                                    260       19
                                     Rest of Indus. 100                         109    15     1635      16.4   92      10      920       9.2                                                   2,555      26
                                     Total Floaters 258                         233 $15      $3,495 $13.5 206         $10    $2,060 $8.0                                                      $5,555 $22
                                     Source: RigLogix, J.P. Morgan.
We estimate that the industry
would have to spend
                                     As shown above, Diamond and Pride would have the greatest capex requirements to
approximately $5.5bn or about
$20 million on average per rig to    bring BOPs up to a potential new standard. Although Pride’s four recent newbuilds
bring the current floater fleet up   (Ascension, Clarion, Mendocino, and Molokai) are all up to standard, only three rigs
to the harsh environment BOP         of the remaining 14 have specifications equal to or higher than two 15kpsi ram and
standard.                            one annular 10kpsi BOPs (North America, South Atlantic, South Pacific).

                                     The limiting factor would be manufacturing capacity
                                     The biggest question we have is how these capital expenditures would be allocated
                                     over the next several years. Three companies comprise the BOP market for floaters:
                                     Cameron (39% share), National Oilwell Varco (34% share), and GE Oil & Gas’s
                                     Hydril (28% share). The charts below show the top manufactures broken out by ram
                                     and annular type.



                                                                                                                                                                                                                             7
J. David Anderson, PE, CFA         North America Equity Research
(1-212) 622-6684                   24 May 2010
jdavid.anderson@jpmchase.com




                                  Figure 3: Ram BOP Market Share                                 Figure 4: Annular BOP Market Share


                                                               Other
                                                                  2%                                              Hy dril
                                                     NOV
                                                                                                                   23%
On a worldwide basis, CAM is                         24%
                                                                          CAM
the top BOP manufacturer with                                                                                                          NOV
39% share, followed by NOV with                                               47%
                                                                                                                                       51%
34% and Hydril with 28%.                             Hy dril                                                        CAM
                                                     27%                                                            26%




                                  Source: RigLogix, J.P. Morgan                                  Source: RigLogix, J.P. Morgan.


                                   Of the approximately 250 floaters that we have data on, CAM has the highest share
                                   of ram BOPs with 47%, representing 278 ram BOPs on 117 rigs. Hydril has the
                                   second highest ram market share with 27%, representing 165 ram BOPs on 58 rigs,
                                   while NOV manufactured 146 ram BOPs on 73 rigs. Annular BOP manufacturing is
                                   dominated by NOV on a worldwide basis with a 51% market share representing 173
                                   annular BOPs on 119 rigs. CAM has the second most share with 87 BOPs on 71 rigs,
                                   while Hydril manufactured 78 BOPs on 61 different rigs.

                                   To get a sense of the potential impact of approximately $5.5 billion in orders over the
                                   next several years we looked at the top two BOP suppliers, Cameron and National
                                   Oilwell Varco. Notably, the charts below show CAM inbound orders and backlog for
                                   the drilling sub-segment and NOV inbound orders and backlog companywide. We
                                   assumed the estimated $5.5bn in capital upgrades would be broken out 20%, 30%,
                                   50% from the years 2011-2013, but this is likely an aggressive estimate as CAM’s
                                   total inbound orders for all of drilling is about $1bn per year. Therefore, it is more
                                   likely that the upgrade process would stretch out over a longer period of time,
                                   accounting for a lower percentage of the capital equipment company’s total capacity.

                                   Figure 5: CAM Drilling Orders and Backlog                     Figure 6: NOV Total Orders and Backlog
                                     $5,000                                                        $12,000

                                     $4,000                                                        $10,000
                                                                                                     $8,000
                                     $3,000
                                                                                                     $6,000
                                     $2,000
                                                                                                     $4,000
                                     $1,000                                                          $2,000
                                          $0                                                              $0
                                                     2007              2008          2009                            2007           2008        2009

                                                   Drilling Orders            Drilling Backlog                       Total Orders          Total Backlog

                                   Source: Company reports                                       Source: Company reports




8
   J. David Anderson, PE, CFA         North America Equity Research
   (1-212) 622-6684                   24 May 2010
   jdavid.anderson@jpmchase.com




                                      The biggest question is industry manufacturing capacity. BOPs are not "off the
                                      shelf"; rather they are custom designed with a typical 12-24 month lead time. While
From order to delivery, the cycle     none of the companies provide specific data on capacity, Cameron and GE may have
time for a new BOP is anywhere
                                      an advantage in being able to convert some manufacturing from subsea trees to
from 12 to 24 months depending
on configuration.                     BOPs. In our analysis, the capital equipment spending requirements for the six
                                      largest offshore drillers will be spent by 2013 and residual orders from the rest of the
                                      industry in later years.

                                      Table 5: Estimated Change in Capex and Free Cash Flow
                                                                      Capex                                Free Cash Flow
                                      Beginning        2010E      2011E      2012E    2013E      2010E      2011E     2012E       2013E
                                      RIG             $1,399     $1,000       $800     $800     $2,579     $3,518    $4,731      $4,716
                                      DO                 498        400        360      360      1,092      1,225     1,668       1,674
                                      PDE              1,342        715        400      200       (978)      (127)      565         814
                                      NE                 944        500        200      200        939      1,443     1,961       1,967
We assumed any upgrades to
                                      ESV                765        370        200      200         48        585     1,097       1,255
the floater rig fleet would not be
required for 2010 but start in        Total           $4,948     $2,985     $1,960   $1,760     $3,680     $6,643 $10,021       $10,427
2011 and be completed by the          (+) Increased Capex           20%        30%      50%
end of 2013. In our opinion this      RIG                          $174       $261     $435
is a worst-case scenario where        DO                            176        264      440
the actual capital upgrades
                                      PDE                            68        102      170
would likely take considerably
longer.                               NE                            130        195      325
                                      ESV                             0          0        0
                                      Total                        $548       $822   $1,370
                                      (=) Potential Increase in Capex ($,mm)                  (=) Decrease in Free Cash Flow ($, mm)
                                      RIG                        $1,174     $1,061   $1,235                  $3,344    $4,470     $4,281
                                      DO                            576        624      800                   1,049     1,404      1,234
                                      PDE                           783        502      370                    (195)       463       644
                                      NE                            630        395      525                   1,313     1,766      1,642
                                      ESV                           370        200      200                     585      1,097     1,255
                                      Total                      $3,533     $2,782   $3,130                  $6,095    $9,199     $9,057
                                      Increase in Capex (%)                                   Decrease in Free Cash Flow (%)
                                      RIG                           17%        33%     54%                      -5%        -6%       -9%
                                      DO                            44%        73%    122%                     -14%       -16%      -26%
                                      PDE                           10%        26%     85%                     -53%       -18%      -21%
                                      NE                            26%        98%    163%                      -9%       -10%      -17%
                                      ESV                            0%         0%      0%                       0%         0%        0%
                                      Total                         18%        42%     78%                      -8%        -8%      -13%
                                      Source: J.P. Morgan estimates.


   The drillers under our coverage    We assumed any upgrades to the floater rig fleet would not be required for 2010 but
   would show an approximate          start in 2011 and be completed by the end of 2013. In our opinion this is a worst-
   20%, 40%, and 80% increase in
   capex for 2011, 2012, and 2013.
                                      case scenario where the actual capital upgrades could take considerably longer.
                                      Using this scenario we assumed 20% of the upgrade capex would be spent in 2011,
   These increases would therefore    30% in 2012, and the remaining 50% will be spent in 2013. Using these assumptions,
   reduce free cash flow during the
   same time periods by 8%, 8%,
                                      the drillers under our coverage would show an approximate 20% increase in capex
   and 13% respectively.              for 2011, 40% increase for 2012, and 80% increase in 2012. These increases would
                                      therefore reduce free cash flow during the same time periods by 8% in 2011, 8% in
                                      2012, and 13% in 2013.




                                                                                                                                           9
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     On an individual company basis there are several stand-outs worth highlighting. As
                                     stated above, Diamond, Pride, and Noble would see the largest increases in capex
                                     and the largest decreases in free cash flow on a percentage basis. Over the 2011-2013
                                     time period, Pride’s free cash flow would fall the most on a percentage basis,
                                     averaging a 27% decline, while Diamond would fall 19% on average and Noble
                                     would fall 12% compared to the group falling 10%.

                                     Could capital expenditures increases translate into higher dayrates?
In the long-run it stands to         Since it is too early to actually determine the exact increases in capital upgrades that
reason that any required capital     might be required, it is also far too early to determine future impacts to offshore
upgrades would eventually
transfer to higher oil prices, but
                                     dayrates. Some of the unknowns include not only the amount of capital upgrades that
in the short-run the effect is       would be required but also whether these costs can be fully passed on. In the long-
much more uncertain.                 run it stands to reason that any required capital upgrades would eventually transfer to
                                     higher oil prices, but in the short-run the effect is much more uncertain. Clearly any
                                     rigs that are already contracted would have to absorb these costs, but whether future
                                     contracts will incorporate these changes completely is still unknown.

                                     Table 6: Required dayrate ($ ‘000/day)
                                       New build                                     IRR
                                      Cost ($,mm)            8%       9%      10%          11%          12%         13%
                                              $400           306     319      333          348          363         378
                                              $500           337     354      372          390          408         427
                                              $600           369     389      410          432          454         477
                                              $700           400     424      448          474          500         527
                                               $800          431     458      487          516          546         576
                                               $900          463     493      525          558          591         626
                                             $1,000          494     528      563          600          637         676
                                     Source: J.P Morgan estimates.


                                     The table above shows the required dayrate necessary for a specified newbuild cost
                                     (capital upgrade) and a desired internal rate of return. Interpolating within the table
                                     and assuming a desired IRR of 11%, an approximate $20mm in additional capital
                                     upgrades to a rig could translate into a 10k/day required increase in floater
                                     dayrates to offset the capital increase.

                                     How much could insurance premiums increase?
Rates to insure a deepwater rig      We expect insurance premiums to increase across the industry for offshore drilling as
range from 50-100bps of the          the event in the Gulf has raised the risk profile of these activities. Insurance
insured value annually. These
                                     premiums have been falling for the offshore drilling industry ever since hurricane
rates could rise as much as
20-30% but depend on many            Katrina, but this event should certainly stop this trend, according to an insurance
factors.                             insider. Rates are expected to rise for new policies, possibly by as much as 20-30%
                                     as the risks for operating offshore, particularly deepwater, have increased. The rates
                                     to insure deepwater rigs vary widely by rig type, location, and owner. For example,
                                     larger companies like Transocean usually pay lower rates than a smaller company
Transocean could end up paying
up to an additional $100mm           like Atwood Oceanics because the larger companies buy policies in bulk and have
annually to insure its fleet         more rigs in different locations, adding diversification. As a rough estimate, current
against property loss. Increases     average rates to insure a deepwater rig for property insurance are around 50-100bps
in liability coverage would          on the value of the rig annually. Therefore, insurance premiums on the Deepwater
provide further increases.
                                     Horizon would have cost Transocean about $3-5mm/yr or between $8-14kpd. If
                                     insurance premiums increase in the 20-30% range, it is possible to see additional


10
J. David Anderson, PE, CFA     North America Equity Research
(1-212) 622-6684               24 May 2010
jdavid.anderson@jpmchase.com




                               premiums of $1mm/year or $3,000 per day for each ultra deepwater vessel and
                               relatively less per vessel for the rest of the fleet.

                               Although these appear to be relatively small numbers, a company the size of
                               Transocean could end up paying as much as an additional $100mm a year in property
                               insurance premiums. This would squeeze margins for contracts that are already on
                               the books, but we expect future contracts to reflect this change and be priced
                               accordingly, since increased rates would affect the entire industry.

                               Notably, our estimates above are just for property insurance. We fully expect liability
                               insurance to increase as well; however, estimates of this kind are too hard to pin
                               down and would likely require time to fully determine. It is possible the insurance
                               firms will choose to limit the liability of these policies as well, particularly as the
                               U.S. government is talking about increasing the maximum amount of punitive
                               liability for operating in the Gulf.




                                                                                                                    11
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Diamond Offshore
                                     Valuation
                                     We continue to rate DO Underweight and are lowering our Dec 2010 price
                                     target to $79 from $87 previously. DO is still not obviously cheap, and while
                                     currently trading at 8.0x our 2011E adjusted earnings compared to the group at 7.0x,
                                     our new price target assumes the stock appreciates to 9.0x, in line with our price
                                     target multiple for the group at 8.9x.

                                     Risks
                                     • Limited near-term downside, could be more defensive in a weaker market.
                                        Diamond is highly contracted in the near term, particularly on the deepwater side.
                                        This should limit downside risk in the near term as well as potentially make
                                        Diamond more of a defensive name in a weakening market. Additionally, the
                                        large annual dividend (9.2% current yield) also adds to the defensive nature of the
                                        stock.
                                     • Petrobras is Diamond’s biggest customer, and Diamond may be selected as a
                                       "bridge" contractor before newbuild rigs are built. A near-term catalyst for
                                       the stock could be a further delay of the 28 rig tender by Petrobras or if the timing
                                       of these rigs is later than expected. In either case, Diamond could become a
                                       leading contender as a "bridge" contractor, given the company’s already strong
                                       presence in the region.
                                     • Older fleet generates higher returns than the group. Diamond’s older fleet
                                       does generate noticeably higher returns than the rest of the peer group. If
                                       maintenance and upgrade capex is less than expected and dayrates remain
                                       elevated compared to the rigs’ age, the older rigs could earn outsized returns for
                                       an extended period, causing the company to outperform the group.
                                     • Smaller jackup fleet, many are contracted. On a percentage basis, Diamond
                                       has one of the lowest exposures to the jackup market with only 14 of its 47 rigs in
                                       this segment and three in the US stacked. We believe this is a positive given the
                                       large number of jackups rolling off contract in the next three months will likely
                                       hold rates below the recovery many analysts are expecting. However, the jackups
                                       Diamond does have are mostly contracted over the next three months, further
                                       helping mitigate near-term weakness in the jackup market.

Underweight
                                     Diamond Offshore Drilling Incorporated (DO;DO US)
Company Data                                                         2009A       2010E                2010E          2011E         2011E
Price ($)                   70.55                                                          (Old)        (New)          (Old)       (New)
Date Of Price           21 May 10    EPS ($)
52-week Range ($)         103.21 -    Q1 (Mar)                              2.51         2.09A         2.09A           2.17         1.98
                            65.40     Q2 (Jun)                              2.79         1.87A         1.83A           2.07         1.85
Mkt Cap ($ mn)           9,808.30     Q3 (Sep)                              2.62         2.18A         2.13A           2.29         2.12
Fiscal Year End               Dec     Q4 (Dec)                              1.98         2.16A         2.11A           2.94         2.71
Shares O/S (mn)               139     FY                                    9.89         8.30A         8.17A           9.47         8.67
Price Target ($)            79.00    Bloomberg EPS FY ($)                  10.18                       8.32A                        8.58
Price Target End        31 Dec 10    Source: Company data, Bloomberg, J.P. Morgan estimates. 'Bloomberg' above denotes Bloomberg
Date                                 consensus estimates.




12
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Ensco plc
                                     Valuation
                                     We continue to rate ESV Overweight with at $52 Dec 2010 price target down
                                     from $60 previously. Given our 2011 adjusted earnings estimate the stock still looks
                                     inexpensive compared to peers. ESV currently trades at 6.7x our 2011E adjusted
                                     earnings compared to the group at 7.0x; our price target assumes the stock
                                     appreciates to 9.0x, in line with our price target multiple for the group at 8.9x.

                                     Risks
                                     • Most near-term earnings downside if dayrates trend lower. Often the largest
                                        potential for upside also comes with the most risk. Since Ensco has the least
                                        contracted revenue in the medium to longer term, the company also has the
                                        highest risks on the downside if rates trend lower. Ensco has particular
                                        vulnerability in the near term to a weaker high-end jackup market, which also
                                        tends to be more volatile than the floater market.
                                     • Newbuild market could be a negative with high exposure to the ultra-deep
                                       market. Ensco is relying very heavily on the ultra-deepwater market. Although
                                       we mostly agree with this strategy, there is risk of this market getting over
                                       supplied, particularly if Petrobras executes on building an additional 28 newbuild
                                       rigs.
                                     • Concentrated jackups in key markets with unique risks. Although half of
                                       Ensco’s revenue should be ultra-deepwater in the longer term, in the near term
                                       about 75% is derived from the jackup market. The jackup market has unique risks
                                       based on location, including hurricane risk in the GOM, timing of spending plans
                                       in the Middle East, and taxes and harsh weather in the North Sea.




Overweight
                                     Ensco plc (ESV;ESV US)
Company Data                                                              2009A         2010E         2010E          2011E         2011E
Price ($)                   38.76                                                          (Old)        (New)          (Old)       (New)
Date Of Price           21 May 10    EPS ($)
52-week Range ($)          52.32 -    Q1 (Mar)                              1.58         1.33A         1.33A           1.15         1.10
                            32.26     Q2 (Jun)                              1.43         0.74A         0.75A           1.22         1.17
Mkt Cap ($ mn)           5,524.07     Q3 (Sep)                              1.06         1.06A         1.00A           1.44         1.38
Fiscal Year End               Dec     Q4 (Dec)                              1.48         1.14A         1.06A           1.82         1.76
Shares O/S (mn)               143     FY                                    5.53         4.08A         3.94A           5.63         5.41
Price Target ($)            52.00    Bloomberg EPS FY ($)                   5.37                       4.00A                        4.81
Price Target End        31 Dec 10    Source: Company data, Bloomberg, J.P. Morgan estimates. 'Bloomberg' above denotes Bloomberg
Date                                 consensus estimates.




                                                                                                                                      13
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Noble Corp.
                                     Valuation
                                     We continue to rate NE Neutral with a $42 Dec 2010 price target down from $49
                                     previously. Although Noble continues to trade as one of the cheapest names in our
                                     group on a straight valuation basis, we believe some of this discount is warranted.
                                     The company has the largest concentration of commodity jackups within our
                                     coverage, which we believe will continue to find difficulty in obtaining contracts,
                                     causing pressure on dayrates. NE currently trades at 6.1x our 2011E adjusted
                                     earnings compared to the group at 7.0x; our price target assumes the stock
                                     appreciates to 8.0x, below our price target multiple for the group at 8.9x.

                                     Risks
                                     • Longer term EPS exposure to floating rig market is limited. In both the near
                                        and longer term, Noble has the least amount of earnings exposure to the
                                        deepwater and ultra-deepwater market, which should be the primary beneficiary
                                        once the exploration cycle picks up in mid 2011.
                                     • Almost half of jackup fleet contracts roll over within next 120 days. Over the
                                       next 120 days, 17 of the company’s 43 jackup rigs come off contract, primarily in
                                       Latin America and the Middle East. While individual data points aren't as
                                       important as in floaters, the status of these rigs could go a long way toward
                                       resetting expectations in the market for jackup rates.
                                     • Highly leveraged to North Sea where tax regime changes could have
                                       significant impact on future demand. Noble has four rigs operating in the
                                       North Sea, one of the most volatile global markets. With higher F&D costs,
                                       operators are looking for ways to cut costs, particularly if tax regime changes
                                       have a negative impact on profitability.
                                     • Highest leverage to jackups also provides the most leverage on the upside.
                                       Noble has the most leverage to the jackup segment of the group with 43 jackups
                                       operating, accounting for about 45% of revenue currently. Since jackup dayrates
                                       have fallen the most from the peak, about 30%, there is risk to the upside if these
                                       rates rebound.


Neutral
                                     Noble Corporation (NE;NE US)
Company Data                                                              2009A         2010E         2010E          2011E         2011E
Price ($)                   32.42                                                          (Old)        (New)          (Old)       (New)
Date Of Price           21 May 10    EPS ($)
52-week Range ($)          45.50 -    Q1 (Mar)                              1.58         1.43A         1.43A           1.34         1.28
                            27.39     Q2 (Jun)                              1.49         1.28A         1.27A           1.31         1.24
Mkt Cap ($ mn)           8,294.34     Q3 (Sep)                              1.63         1.33A         1.32A           1.35         1.29
Fiscal Year End               Dec     Q4 (Dec)                              1.72         1.46A         1.44A           1.63         1.56
Shares O/S (mn)               256     FY                                    6.41         5.51A         5.46A           5.63         5.37
Price Target ($)            42.00    Bloomberg EPS FY ($)                   6.32                       5.40A                        5.28
Price Target End        31 Dec 10    Source: Company data, Bloomberg, J.P. Morgan estimates. 'Bloomberg' above denotes Bloomberg
Date                                 consensus estimates.




14
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Pride International
                                     Valuation
                                     Pride shares trade at a premium to the group average on both a current P/E and
                                     adjusted-P/E basis. Contract for the Deep Ocean Molokai or a return to work for the
                                     idle/stacked rigs could provide further earnings upside, but the stock is expensive in
                                     our view and there are better opportunities to put money to work in this space. Our
                                     $30 Dec 2010 price target, lowered from $33 previously, is based on 9.7x our
                                     2011E adjusted P/E, above our group price target multiple of 8.9x.

                                     Investment Risks
                                     • Greatest risk of downward earnings revision. In the near term, Pride has the
                                        biggest risk to earnings revisions, particularly over the next 4 quarters. Given our
                                        below consensus deepwater dayrate assumptions, consensus earnings
                                        expectations are about 20% above our estimates.
                                     • Petrobras is a major customer, newbuild rig program could be a risk.
                                       Petrobras is one of Pride’s largest customers with 7 rigs operating in Brazil along
                                       with another operating for OGX. Any additional newbuilds built in Brazil or
                                       other uncontracted deepwater rigs that head to Brazil would be a negative for
                                       Pride as the company looks to roll over the rigs it currently has in the region.
                                     • Newbuild Drillships could be delayed. A delay in any or all of Pride's three
                                       newbuild drillships could cause the stock to underperform. About half of Pride's
                                       ultra-deepwater rigs are currently under construction and a delay would have a
                                       material affect on our 2011 earnings. Toward the end of 2011, these newbuild
                                       ultra-deepwater rigs account for about 15% of the company's revenue.


Neutral
                                     Pride International Inc. (PDE;PDE US)
Company Data                                                          2009A             2010E         2010E          2011E         2011E
Price ($)                   25.15                                                          (Old)        (New)          (Old)       (New)
Date Of Price           21 May 10    EPS ($)
52-week Range ($)          34.67 -    Q1 (Mar)                               0.92        0.32A         0.42A           0.63         0.52
                            19.46     Q2 (Jun)                               0.71        0.28A         0.26A           0.75         0.65
Mkt Cap ($ mn)           4,416.75     Q3 (Sep)                               0.20        0.37A         0.34A           0.80         0.70
Fiscal Year End               Dec     Q4 (Dec)                             (0.22)        0.51A         0.46A           1.07         0.97
Shares O/S (mn)               176     FY                                     1.90        1.47A         1.52A           3.25         2.84
Price Target ($)            30.00    Bloomberg EPS FY ($)                    2.22                      1.83A                        3.32
Price Target End        31 Dec 10    Source: Company data, Bloomberg, J.P. Morgan estimates. 'Bloomberg' above denotes Bloomberg
Date                                 consensus estimates.




                                                                                                                                      15
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




                                     Transocean
                                     Valuation
                                     Transocean has been hit hard due to liability concerns over the Deepwater Horizon
                                     incident last month. We acknowledge this will be an ongoing concern and have
                                     slightly lowered the multiple relative to the group. Transocean currently trades at
                                     6.4x our 2011E adjusted EPS estimate. Our $80 Dec 2010 price target (down from
                                     $87 previously) assumes the stock appreciates to 8.8x, slightly below the group
                                     price target average of 8.9x.

                                     Risks
                                     • If jackup market weakens, RIG will be forced to stack more rigs. Although
                                        RIG has the largest fleet in the offshore market, which is mostly viewed as a
                                        positive in a rising market, it can also be a curse in a declining market. As seen in
                                        the current downturn, Transocean stacked the highest percentage of rigs, helping
                                        the rest of the market stabilize rates, particularly in the jackup segment.
                                     • Petrobras decision could go either way. Scenario 1: Petrobras could delay 28
                                       newbuild tender or otherwise may be forced to the open market for rigs, then
                                       floater dayrates could unexpectedly shift higher, which would be positive for the
                                       entire market, lifting all boats. At the same time, RIG has less near-term earnings
                                       upside and would likely underperform. Scenario 2: Petrobras goes ahead with
                                       plans and does not come to market, leaving the floater market oversupplied. Rates
                                       would move lower; however, Transocean would likely outperform because of its
                                       higher contracted status.
                                     • Newbuilds could be delayed. Transocean currently has five newbuild ultra
                                       deepwater floaters under construction, and any newbuild rig has a risk of delayed
                                       delivery, which could lead to lower 2011 EPS.


Neutral
                                     Transocean Ltd. (RIG;RIG US)
Company Data                                                              2009A         2010E         2010E          2011E         2011E
Price ($)                   59.24                                                          (Old)        (New)          (Old)       (New)
Date Of Price           21 May 10    EPS ($)
52-week Range ($)          94.88 -    Q1 (Mar)                              3.77         2.23A         2.23A           2.20         2.11
                            57.84     Q2 (Jun)                              2.81         1.71A         1.68A           2.28         2.20
Mkt Cap ($ mn)          19,859.34     Q3 (Sep)                              2.66         1.90A         1.91A           2.42         2.35
Fiscal Year End               Dec     Q4 (Dec)                              2.21         2.05A         2.09A           3.15         3.11
Shares O/S (mn)               335     FY                                   11.46         7.89A         7.92A          10.06         9.77
Price Target ($)            80.00    Bloomberg EPS FY ($)                  11.78                       8.52A                       10.11
Price Target End        31 Dec 10    Source: Company data, Bloomberg, J.P. Morgan estimates. 'Bloomberg' above denotes Bloomberg
Date                                 consensus estimates.




16
J. David Anderson, PE, CFA                   North America Equity Research
(1-212) 622-6684                             24 May 2010
jdavid.anderson@jpmchase.com




Table 7: Floater BOP Statistics
Drilling contracter              Rig Depth Ram Manufacturer Annular Manufacturer   Rams   Ram psi   Annular   Annular psi
Diamond
Ocean clipper                      8,500         NOV                   NOV          2     15,000      2        10,000
Ocean Alliance                     5,000         NOV                   NOV          2     15,000      2        10,000
Ocean Ambassador                   1,100         CAM                   NOV          2     10,000      2         5,000
Ocean America                      5,000         CAM                   CAM          2     15,000      2        10,000
Ocean Baroness                     7,000         Hydril                Hydril       2     15,000      2        10,000
Ocean Bounty                       1,500         NOV                   NOV          2     10,000      2         5,000
Ocean Concord                      2,000         CAM                   NOV          2     10,000      2         5,000
Ocean Confidence                  10,000         NOV                   NOV          3     15,000      2        10,000
Ocean Courage                     10,000         CAM                   CAM          3     15,000      1        10,000
Ocean Endeavor                    10,000         Hydril                Hydril       2     15,000      2        10,000
Ocean Epoch                        1,640         CAM                   NOV          2     10,000      1         5,000
Ocean General                      1,640         CAM                   NOV          2     10,000      2         5,000
Ocean Guardian                     1,500         CAM                   CAM          2     10,000      2        10,000
Ocean Lexington                    2,200         CAM                   NOV          2     10,000      2         5,000
Ocean Monarch                      8,000         CAM                   NOV          2     10,000      2         5,000
Ocean New Era                      1,500         CAM                   NOV          2     10,000      2         5,000
Ocean Nomad                        1,200         Hydril                NOV          2     10,000      2         5,000
Ocean Patriot                      1,500         CAM                   CAM          2     15,000      2        10,000
Ocean Princess                     1,500         CAM                   CAM          2     15,000      2        10,000
Ocean Quest                        3,500         Hydril                Hydril       2     15,000      2        10,000
Ocean Rover                        6,500         Hydril                Hydril       2     15,000      2        10,000
Ocean Saratoga                     2,200         CAM                   NOV          2     10,000      2         5,000
Ocean Star                         5,500         NOV                   NOV          2     15,000      2        10,000
Ocean Valiant                      5,000         CAM                   CAM          2     15,000      2        10,000
Ocean Valor                       10,000         CAM                   CAM          3     15,000      1        10,000
Ocean Vanguard                     1,500         Hydril                CAM          2     15,000      2        10,000
Ocean Victory                      6,000         Hydril                NOV          2     10,000      1         5,000
Ocean Voyager                      3,200         Hydril                NOV          2     10,000      1         5,000
Ocean Whittington                  1,500         CAM                   NOV          2     10,000      2         5,000
Ocean Winner                       3,500         NOV                   Hydril       4     10,000      2         5,000
Ocean Worker                       3,500         CAM                   NOV          2     10,000      2         5,000
Ocean Yatzy                        3,300         CAM                   NOV          2     10,000      2         5,000
Ocean Yorktow n                    2,850         CAM                   NOV          2     10,000      2         5,000
ENSCO
ENSCO 7500                        8,000          Hydril                CAM          5     15,000      2        10,000
ENSCO 8500                        8,500          Hydril                Hydril       6     15,000      2        10,000
ENSCO 8501                        8,500          Hydril                Hydril       6     15,000      1        10,000
ENSCO 8502                        8,500          Hydril                Hydril       6     15,000      1        10,000
ENSCO 8503                        8,500          Hydril                Hydril       6     15,000      1        10,000
ENSCO 8504                        8,500          Hydril                Hydril       6     15,000      1        10,000
ENSCO 8505                        8,500          Hydril                Hydril       6     15,000      1        10,000
ENSCO 8506                        8,500          Hydril                Hydril       6     15,000      1        10,000
Source: RigLogix, J.P. Morgan.




                                                                                                                        17
J. David Anderson, PE, CFA           North America Equity Research
(1-212) 622-6684                     24 May 2010
jdavid.anderson@jpmchase.com




Table 8: Floater BOP Statistics
Drilling contracter      Rig Depth Ram Manufacturer Annular Manufacturer   Rams   Ram psi   Annular   Annular psi
Pride
Deep Ocean Ascension      12,000        NOV                 NOV             1     15,000      2        15,000
Deep Ocean Clarion        12,000        NOV                 NOV             1     15,000      2        15,000
Deep Ocean Mendocino      12,000        NOV                 NOV             1     15,000      2        15,000
Deep Ocean Molokai        12,000        NOV                 NOV             1     15,000      1        15,000
Pride Africa              10,000        CAM                 NOV             2     10,000      1         5,000
Pride Angola              10,000        CAM                 NOV             2     10,000      2         5,000
Pride Brazil               5,000        CAM                 NOV             4     10,000      2        5,000
Pride Carlos Walter        4,921        CAM                 NOV             4     10,000      2         5,000
Pride Mexico               2,300        NOV                 CAM             1     10,000      2        5,000
Pride North America        7,500        CAM                 Hydril          3     15,000      2        10,000
Pride Portland             5,577        CAM                 NOV             4     10,000      2        5,000
Pride Rio de Janeiro       5,577        CAM                 NOV             4     10,000      2         5,000
Pride South America        3,400        NOV                 NOV             2     10,000      1         5,000
Pride South Atlantic       1,500        CAM                 CAM             4     15,000      2        10,000
Pride South Pacific        5,000        CAM                 Hydril          3     15,000      2        10,000
Pride South Seas           1,000        NOV                 NOV             2     10,000      2        5,000
Pride Venezuela            1,500        CAM                 NOV             2     15,000      2         5,000
Sea Explorer               1,000        CAM                 NOV             2     10,000      2        5,000
Noble
Noble Leo Segerius         5,600        CAM                 NOV             2     10,000      2         5,000
Noble Muravlenko           4,900        CAM                 CAM             0        -        1        10,000
Noble Roger Eason          7,200        Hydril              Hydril          1     15,000      0            -
Noble Amos Runner          8,000        NOV                 NOV             2     15,000      2         5,000
Noble Clyde Boudreaux     10,000        NOV                 NOV             2     10,000      2        15,000
Noble Danny Adkins        12,000        NOV                 NOV             2     15,000      2        10,000
Noble Dave Beard          10,000        NOV                 NOV             2     15,000      2        10,000
Noble Homer Ferrington     7,200        NOV                 NOV             2     15,000      1        5,000
Noble Jim Day             12,000        NOV                 NOV             2     15,000      2        10,000
Noble Jim Thompson         6,000        NOV                 NOV             2     15,000      2        10,000
Noble Lorris Bouzigard     4,000        CAM                 Hydril          2     10,000      1        5,000
Noble Max Smith            7,000        NOV                 NOV             2     15,000      2         5,000
Noble Paul Romano          6,000        NOV                 NOV             2     15,000      2         5,000
Noble Paul Wolff           9,200        NOV                 NOV             2     15,000      2         5,000
Noble Therald Martin       4,000        CAM                 Hydril          2     10,000      1        5,000
Noble Ton Van Langeveld    1,500         CIW                NOV             2     10,000      2        5,000
Transocean
Deepw ater Discovery      10,000        CAM                 CAM             3     15,000      1        10,000
Deepw ater Expedition     10,000        CAM                 CAM             3     15,000      2        10,000
Deepw ater Frontier       10,000        CAM                 CAM             2     15,000      2        10,000
Deepw ater Millennium     10,000        CAM                 CAM             3     15,000      2        10,000
Deepw ater Navigator       7,200        CAM                 CAM             1     15,000      1        10,000
Deepw ater Pathfinder     10,000        CAM                 CAM             3     15,000      2        10,000
Dhirubhai Deepw ater KG1 12,000         NOV                 NOV             2     15,000      1        10,000
Discoverer 534             7,000        NOV                 NOV             2     10,000      2         5,000
Discoverer Americas       12,000        Hydril              Hydril          3     15,000      1        10,000
Discoverer Clear Leader   12,000        Hydril              Hydril          3     15,000      1        10,000
Discoverer Deep Seas      10,000        Hydril              Hydril          3     15,000      1        10,000
Discoverer Enterprise     10,000        Hydril              Hydril          1     15,000      1        10,000
Discoverer Inspiration    12,000        Hydril              Hydril          3     15,000      1        10,000
Discoverer Seven Seas      7,000        Hydril              NOV             2     15,000      1        10,000
Discoverer Spirit         10,000        Hydril              Hydril          6     15,000      1        10,000
Source: RigLogix, J.P. Morgan.



18
J. David Anderson, PE, CFA                     North America Equity Research
(1-212) 622-6684                               24 May 2010
jdavid.anderson@jpmchase.com




Table 9: Floater BOP Statistics
Drilling contracter              Rig Depth Ram Manufacturer Annular Manufacturer   Rams   Ram psi   Annular   Annular psi
Transocean cont.
GSF CR Luigs                     10,000         CAM                  CAM            4     15,000      1        10,000
GSF Explorer                     7,800          CAM                  NOV            3     15,000      2         5,000
GSF Jack Ryan                    10,000         CAM                  NOV            4     15,000      2        10,000
Petrobras 10000                  12,000         NOV                  NOV            2     15,000      2        10,000
Actinia                          1,500          CAM                  CAM            2     10,000      2         5,000
C Kirk Rhein Jr                  3,300          CAM                  NOV            2     10,000      1         5,000
Cajun Express                    8,500          CAM                  CAM            3     15,000      1        10,000
Deepw ater Nautilus              8,000          CAM                  CAM            3     15,000      2        10,000
Development Driller III          7,500          Hydril               Hydril         3     15,000      2        10,000
Falcon 100                       2,500          CAM                  CAM            1     15,000      4        10,000
GSF Aleutian Key                 2,300          NOV                  NOV            2     10,000      2         5,000
GSF Arctic I                     3,400          CAM                  CAM            2     15,000      2        10,000
GSF Arctic III                   1,800          CAM                  CAM            2     15,000      2        10,000
GSF Arctic IV                    1,800          CAM                  CAM            2     15,000      2        10,000
GSF Celtic Sea                   5,750          CAM                  NOV            2     15,000      2        10,000
GSF Development Driller I        7,500                                              1     15,000      0            -
GSF Grand Banks                  1,500          CAM                  CAM            2     15,000      2        10,000
GSF Rig 135                      2,800          Hydril               Hydril         2     15,000      2         5,000
GSF Rig 140                      1,500          Hydril               NOV            2     15,000      2         5,000
Henry Goodrich                   5,000          S&S                  NOV            3     15,000      1        10,000
J W McLean                       1,500          NOV                  CAM            1     10,000      1         5,000
Jack Bates                       5,400          CAM                  CAM            4     15,000      2        10,000
Jim Cunningham                   4,600          NOV                  NOV            2     15,000      1        10,000
M G Hulme Jr                     5,000          CAM                  CAM            2     15,000      1        10,000
Paul B Loyd Jr                   2,000          CAM                  CAM            2     15,000      1        10,000
Sedco 601                        1,500          NOV                  NOV            2     10,000      1         5,000
Sedco 700                        3,600          CAM                  NOV            2     10,000      1         5,000
Sedco 702                        6,500          CAM                  NOV            2     10,000      2         5,000
Sedco 703                        2,000          NOV                  NOV            2     10,000      1         5,000
Sedco 704                        1,000          Hydril               NOV            2     15,000      1         5,000
Sedco 706                        6,000          CAM                  NOV            2     10,000      1         5,000
Sedco 707                        6,500          Hydril               Hydril         2     15,000      1        10,000
Sedco 709                        5,000          Hydril               NOV            2     15,000      2        10,000
Sedco 710                        4,500           CIW                 Hydril         2     10,000      2         5,000
Sedco 711                        1,800          NOV                  NOV            2     15,000      2        10,000
Sedco 712                        1,600          Hydril               Hydril         2     15,000      2         5,000
Sedco 714                        1,600          Hydril               Hydril         2     15,000      2         5,000
Sedco Energy                     7,500          Hydril               CAM            3     15,000      2        10,000
Sedco Express                    7,500          CAM                  CAM            2     10,000      1         5,000
Sedneth 701                      1,500          NOV                  NOV            2     10,000      0            -
Sovereign Explorer               4,500          CAM                  CAM            2     15,000      0            -
Transocean Amirante              3,500          CAM                  NOV            2     10,000      1         5,000
Transocean Arctic                1,640          CAM                  CAM            2     15,000      2            -
Transocean Driller               3,000          Hydril               Hydril         2     15,000      1        10,000
Transocean John Shaw             1,800          Hydril               NOV            2     10,000      1        10,000
Transocean Leader                4,500          CAM                  Hydril         2     15,000      1        10,000
Transocean Legend                3,500          CAM                  NOV            2     10,000      2         5,000
Transocean Marianas              7,000          Hydril               NOV            2     15,000      1        10,000
Transocean Polar Pioneer         1,640          Hydril               Hydril         2     15,000      0            -
Transocean Prospect              1,500          Hydril               Hydril         2     15,000      1        10,000
Transocean Rather                4,500          Hydril               NOV            2     15,000      1        10,000
Transocean Richardson            5,000          Hydril               NOV            2     15,000      1        10,000
Transocean Searcher              1,500          CAM                  CAM            2     15,000      1        10,000
Transocean Winner                1,500          Hydril               Hydril         2     15,000      1         5,000
Source: RigLogix, J.P. Morgan.


                                                                                                                            19
J. David Anderson, PE, CFA                                  North America Equity Research
(1-212) 622-6684                                            24 May 2010
jdavid.anderson@jpmchase.com




     Diamond Offshore: Summary of Financials
     Income Statement - Annual                               FY09A FY10E FY11E FY12E                      Income Statement - Quarterly              1Q10A 2Q10E 3Q10E 4Q10E

     Revenues                                                   3,631      3,673      4,113      4,393    Revenues                                      860      875      965      973
     Cost of products sold                                    (1,224)    (1,445)    (1,726)    (1,766)    Cost of products sold                       (305)    (362)    (385)    (392)
     Gross profit                                                    -          -          -          -   Gross profit                                    -        -        -        -
     SG&A                                                         (63)       (70)       (78)       (83)   SG&A                                         (17)     (17)     (18)     (18)
     DD&A                                                       (346)      (416)      (482)      (540)    DD&A                                         (97)    (100)    (107)    (113)
     Other operating expenses                                        -          -          -          -   Other operating expenses                        -        -        -        -
     Operating Income                                                -          -          -          -   Operating Income                                -        -        -        -
     EBIT                                                       1,905      1,663      1,759      1,936    EBIT                                          426      375      433      429

     EBITDA                                                    2,252      2,079      2,241      2,476     EBITDA                                       523      474      540      542

     Net interest income / (expense)                             (45)       (84)       (84)       (84)    Net interest income / (expense)              (21)     (21)     (21)     (21)
     Income applicable to minority interests                        -          -          -          -    Income applicable to minority interests         -        -        -        -
     Pretax income                                             1,376      1,136      1,206      1,334     Pretax income                                 291     255       297      294
     Taxes                                                     (492)      (444)      (469)      (519)     Taxes                                       (115)     (99)    (115)    (114)
     Tax rate (%)                                             26.3%      28.1%      28.0%      28.0%      Tax rate (%)                               28.4%    28.0%    28.0%    28.0%
     Reported net income                                       1,376      1,136      1,206      1,334     Reported net income                           291     255       297      294
     Non-recurring items, disc ops                                  0          0          0          0    Non-recurring items, disc ops                   0        0        0        0
     Adjusted net income                                       1,376      1,136      1,206      1,334     Adjusted net income                           291     255       297      294
     Average diluted shares outstanding                          139        139        139        139     Average diluted shares outstanding            139     139       139      139

     EPS                                                         9.89       8.17       8.67       9.58    EPS                                         2.09     1.83     2.13     2.11
     EPS growth rate (%)                                            -          -          -          -    EPS growth rate (%)                            -        -        -        -
     Dividend per share                                          8.00       8.00       8.00       8.00    Dividend per share                          2.00     2.00     2.00     2.00

     WTI crude price ($/bbl)                                         -          -          -          -   WTI crude price ($/bbl)                         -        -        -        -
     Henry Hub natural gas price ($/mcf)                             -          -          -          -   Henry Hub natural gas price ($/mcf)             -        -        -        -


     Balance Sheet and Cash Flow Data                        FY09A FY10E FY11E FY12E                      Ratio Analysis                            FY09A FY10E FY11E FY12E

     Cash and cash equivalents                                   777      1,151      1,151      1,151     Valuation
     Other current assets                                        155        171        203        198     P/E (adjusted)                                7.1      8.6      8.1      7.4
     Total current assets                                      1,723      2,221      2,422      2,389     P/CF                                            -        -        -        -
     Net PP&E                                                  4,432      4,486      4,604      4,744     Enterprise value/EBITDA                         -        -        -        -
     Other assets                                                109        409        409        409     EV/DACF                                         -        -        -        -
     Total assets                                              6,264      7,116      7,434      7,542
                                                                                                          Ratios
     Total debt                                                1,495      1,797      1,949      1,835     Net debt/equity                                 -        -        -        -
     Total liabilities                                             -          -          -          -     Net debt/capital                           16.6%    15.1%    17.6%    14.8%
     Minority interests                                            -          -          -          -     Net coverage ratio                              -        -        -        -
     Preferred stock                                               -          -          -          -     ROE                                        39.4%    31.2%    32.6%    34.6%
     Shareholders' equity                                      6,264      7,116      7,434      7,542     ROCE                                       37.8%    27.7%    28.7%    30.3%

     Net Income                                                 1,376     1,136      1,206      1,334     Yield and cash returns
     DD&A                                                       (346)     (416)      (482)      (540)     CFPS                                            -        -        -        -
     Deferred taxes                                                86        (5)          0         0     CF yield                                    1.3%    10.3%     9.8%    12.5%
     Other                                                          -          -          -         -     FCF yield                                       -        -        -        -
     Cash earnings                                                  -          -          -         -     Dividend yield                             11.3%    11.3%    11.3%    11.3%
     Change in working capital                                  (286)          7     (128)         32     Dividend payout ratio                           -        -        -        -
     Cash flow from operations                                  1,517     1,581      1,560      1,906     Buyback yield                                   -        -        -        -
     Capex                                                    (1,362)     (498)      (600)      (680)     Total cash returns (%)                          -        -        -        -
     Dividends                                                      -          -          -         -
     Share buybacks (net)                                           0          0          0         0
     Change in debt                                                 -          -          -         -     Mkt Cap (current) ($bn)                     9.81
     Change in preferred stock                                      -          -          -         -     Enterprise Value (current)                11,764
     Other uses of cash                                             -          -          -         -
     Change in cash                                                40       124         (0)         0

     Free cash flow                                              154      1,083        960      1,226

     Source: Company reports and J.P. Morgan estimates.
     Note: $ in millions (except per-share data). Fiscal year ends Dec




20
J. David Anderson, PE, CFA                                 North America Equity Research
(1-212) 622-6684                                           24 May 2010
jdavid.anderson@jpmchase.com




    Ensco plc: Summary of Financials
    Income Statement - Annual                               FY09A FY10E FY11E FY12E                  Income Statement - Quarterly              1Q10A 2Q10E 3Q10E 4Q10E

    Revenues                                                  1,951     1,751      2,236     2,667   Revenues                                      449      379      455      468
    Cost of products sold                                     (735)     (786)      (979)   (1,139)   Cost of products sold                       (185)    (183)    (209)    (210)
    Gross profit                                                   -         -         -         -   Gross profit                                    -        -        -        -
    SG&A                                                        (64)      (79)     (101)     (107)   SG&A                                         (21)     (17)     (20)     (21)
    DD&A                                                      (207)     (229)      (259)     (289)   DD&A                                         (54)     (56)     (59)     (60)
    Other operating expenses                                  (799)     (865)    (1,080)   (1,245)   Other operating expenses                    (206)    (200)    (229)    (231)
    Operating Income                                               -         -         -         -   Operating Income                                -        -        -        -
    EBIT                                                        945       656        897     1,133   EBIT                                          190      122      167      177

    EBITDA                                                    1,152       885     1,156     1,422    EBITDA                                       244      179      226      237

    Net interest income / (expense)                               0          0        0         0    Net interest income / (expense)                 0        0        0        0
    Income applicable to minority interests                       -          -        -         -    Income applicable to minority interests         -        -        -        -
    Pretax income                                                 -          -        -         -    Pretax income                                   -        -        -        -
    Taxes                                                     (177)      (113)    (146)     (183)    Taxes                                        (33)     (20)     (29)     (31)
    Tax rate (%)                                             18.5%      16.9%    16.0%     16.0%     Tax rate (%)                               17.2%    16.0%    17.0%    17.0%
    Reported net income                                         777        556      764       962    Reported net income                          160      105      141      149
    Non-recurring items, disc ops                                 0          0        0         0    Non-recurring items, disc ops                   0        0        0        0
    Adjusted net income                                         777        556      764       962    Adjusted net income                          187      105      141      149
    Average diluted shares outstanding                          140        141      141       141    Average diluted shares outstanding           141      141      141      141

    EPS                                                        5.53      3.94      5.41      6.82    EPS                                         1.33     0.75     1.00     1.06
    EPS growth rate (%)                                           -         -         -         -    EPS growth rate (%)                            -        -        -        -
    Dividend per share                                         0.10      1.08      1.40      1.40    Dividend per share                          0.02     0.35     0.35     0.35

    WTI crude price ($/bbl)                                        -         -         -         -   WTI crude price ($/bbl)                         -        -        -        -
    Henry Hub natural gas price ($/mcf)                            -         -         -         -   Henry Hub natural gas price ($/mcf)             -        -        -        -


    Balance Sheet and Cash Flow Data                        FY09A FY10E FY11E FY12E                  Ratio Analysis                            FY09A FY10E FY11E FY12E

    Cash and cash equivalents                                 1,141     1,151     1,515     2,380    Valuation
    Other current assets                                        187       181       251       280    P/E (adjusted)                               7.0      9.8       7.2      5.7
    Total current assets                                      1,653     1,663     2,225     3,172    P/CF                                        14.7    254.1       9.7      5.1
    Net PP&E                                                  4,477     4,905     5,016     4,928    Enterprise value/EBITDA                        -        -         -        -
    Other assets                                                617       599       599       599    EV/DACF                                        -        -         -        -
    Total assets                                              6,747     7,167     7,840     8,699
                                                                                                     Ratios
    Total debt                                                  257       266       266       266    Net debt/equity                                  -       -      -       -
    Total liabilities                                             -         -         -         -    Net debt/capital                          (18.7%) (17.1%) (23.3%) (40.5%)
    Minority interests                                            -         -         -         -    Net coverage ratio                               -       -      -       -
    Preferred stock                                               -         -         -         -    ROE                                         15.3%    9.7% 12.3% 13.9%
    Shareholders' equity                                      5,499     5,948     6,514     7,278    ROCE                                        17.6% 11.4% 14.7% 18.4%

    Net Income                                                  777        556      764       962    Yield and cash returns
    DD&A                                                      (207)      (229)    (259)     (289)    CFPS                                         2.64     0.15     3.98     7.53
    Deferred taxes                                                20        11        0         0    CF yield                                        -        -        -        -
    Other                                                          -         -        -         -    FCF yield                                   7.3%     0.4%    10.3%    19.6%
    Cash earnings                                                  -         -        -         -    Dividend yield                              0.3%     2.8%     3.6%     3.6%
    Change in working capital                                   148       (15)     (91)        13    Dividend payout ratio                           -        -        -        -
    Cash flow from operations                                 1,239        829      931     1,263    Buyback yield                                   -        -        -        -
    Capex                                                     (861)      (765)    (370)     (200)    Total cash returns (%)                          -        -        -        -
    Dividends                                                      -         -        -         -
    Share buybacks (net)                                           -         -        -         -
    Change in debt                                              (17)         9        0         0    Mkt Cap (current) ($bn)                     5.52
    Change in preferred stock                                      -         -        -         -    Enterprise Value (current)                 4,462
    Other uses of cash                                             -         -        -         -
    Change in cash                                              352         10      364       865

    Free cash flow                                              371        22       561     1,063

    Source: Company reports and J.P. Morgan estimates.
    Note: $ in millions (except per-share data). Fiscal year ends Dec




                                                                                                                                                                                21
J. David Anderson, PE, CFA                                  North America Equity Research
(1-212) 622-6684                                            24 May 2010
jdavid.anderson@jpmchase.com




     Noble Corp.: Summary of Financials
     Income Statement - Annual                               FY09A FY10E FY11E FY12E                     Income Statement - Quarterly              1Q10A 2Q10E 3Q10E 4Q10E

     Revenues                                                   3,641      3,455      3,751      4,097   Revenues                                      841      825      864      926
     Cost of products sold                                    (1,110)    (1,247)    (1,505)    (1,634)   Cost of products sold                       (280)    (303)    (323)    (341)
     Gross profit                                               2,530      2,209      2,246      2,463   Gross profit                                  561      522      541      585
     SG&A                                                         (80)       (95)       (94)     (102)   SG&A                                         (22)     (23)     (24)     (26)
     DD&A                                                       (408)      (497)      (536)      (561)   DD&A                                        (116)    (124)    (127)    (130)
     Other operating expenses                                        -          -          -         -   Other operating expenses                        -        -        -        -
     Operating Income                                                -          -          -         -   Operating Income                                -        -        -        -
     EBIT                                                       2,042      1,616      1,616      1,799   EBIT                                          423      375      390      429

     EBITDA                                                    2,450      2,113      2,152      2,360    EBITDA                                       539      499      517      559

     Net interest income / (expense)                              (2)        (0)         0          0    Net interest income / (expense)               (0)        0        0        0
     Income applicable to minority interests                        -          -         -          -    Income applicable to minority interests         -        -        -        -
     Pretax income                                             2,047      1,625      1,624      1,807    Pretax income                                426      377      392      431
     Taxes                                                     (365)      (211)      (227)      (271)    Taxes                                        (55)     (49)     (51)     (56)
     Tax rate (%)                                             17.8%      13.0%      14.0%      15.0%     Tax rate (%)                               13.0%    13.0%    13.0%    13.0%
     Reported net income                                       1,679      1,414      1,396      1,536    Reported net income                          371      328      341      375
     Non-recurring items, disc ops                                (3)          0         0          0    Non-recurring items, disc ops                   0        0        0        0
     Adjusted net income                                       1,682      1,414      1,396      1,536    Adjusted net income                          371      328      341      375
     Average diluted shares outstanding                          262        259        260        261    Average diluted shares outstanding           259      259      259      259

     EPS                                                        6.41   5.46           5.37        5.88   EPS                                          1.43    1.27    1.32    1.44
     EPS growth rate (%)                                      11.3% (15.0%)         (1.7%)       9.5%    EPS growth rate (%)                       (11.4%) (17.8%) (16.5%) (14.6%)
     Dividend per share                                         0.16   0.18           0.18        0.18   Dividend per share                           0.05    0.05    0.05    0.05

     WTI crude price ($/bbl)                                         -          -          -         -   WTI crude price ($/bbl)                         -        -        -        -
     Henry Hub natural gas price ($/mcf)                             -          -          -         -   Henry Hub natural gas price ($/mcf)             -        -        -        -


     Balance Sheet and Cash Flow Data                        FY09A FY10E FY11E FY12E                     Ratio Analysis                            FY09A FY10E FY11E FY12E

     Cash and cash equivalents                                   735      1,459      2,573      4,130    Valuation
     Other current assets                                        100        122        136        139    P/E (adjusted)                                5.0      5.9      6.0      5.5
     Total current assets                                      1,483      2,281      3,483      5,065    P/CF                                            -        -        -        -
     Net PP&E                                                  6,634      7,144      7,247      7,086    Enterprise value/EBITDA                         -        -        -        -
     Other assets                                                279        277        277        277    EV/DACF                                         -        -        -        -
     Total assets                                              8,397      9,701     11,007     12,429
                                                                                                         Ratios
     Total debt                                                  751        751        751        751    Net debt/equity                                 -        -       -       -
     Total liabilities                                         1,175      1,197      1,197      1,197    Net debt/capital                            0.2%    (9.7%) (24.5%) (46.4%)
     Minority interests                                            0          0          0          0    Net coverage ratio                              -        -       -       -
     Preferred stock                                               -          -          -          -    ROE                                        27.8%    19.1% 16.2% 15.4%
     Shareholders' equity                                      6,788      7,999      9,264     10,668    ROCE                                       26.9%    20.1% 19.0% 20.9%

     Net Income                                                 1,679     1,414      1,396      1,536    Yield and cash returns
     DD&A                                                       (408)     (497)      (536)      (561)    CFPS                                            -        -        -        -
     Deferred taxes                                                 37       (0)          0          0   CF yield                                    7.5%    10.4%    14.9%    20.1%
     Other                                                           -         -          -          -   FCF yield                                       -        -        -        -
     Cash earnings                                                   -         -          -          -   Dividend yield                              0.5%     0.6%     0.6%     0.6%
     Change in working capital                                    (38)      (43)       (47)        (9)   Dividend payout ratio                           -        -        -        -
     Cash flow from operations                                  2,137     1,874      1,885      2,089    Buyback yield                                   -        -        -        -
     Capex                                                    (1,495)     (944)      (640)      (400)    Total cash returns (%)                          -        -        -        -
     Dividends                                                       -         -          -          -
     Share buybacks (net)                                       (204)     (152)        (84)       (84)
     Change in debt                                             (173)          0          0          0   Mkt Cap (current) ($bn)                     8.29
     Change in preferred stock                                       -         -          -          -   Enterprise Value (current)                10,459
     Other uses of cash                                              0         0          0          0
     Change in cash                                               222       724      1,114      1,557

     Free cash flow                                              642        930      1,245      1,689

     Source: Company reports and J.P. Morgan estimates.
     Note: $ in millions (except per-share data). Fiscal year ends Dec




22
J. David Anderson, PE, CFA                                 North America Equity Research
(1-212) 622-6684                                           24 May 2010
jdavid.anderson@jpmchase.com




    Pride International: Summary of Financials
    Income Statement - Annual                               FY09A FY10E FY11E FY12E                   Income Statement - Quarterly              1Q10A 2Q10E 3Q10E 4Q10E

    Revenues                                                  1,753      1,503      2,149     2,600   Revenues                                      363      325      381        435
    Cost of products sold                                     (955)      (889)    (1,188)   (1,290)   Cost of products sold                       (201)    (197)    (233)      (257)
    Gross profit                                                798        614        961     1,310   Gross profit                                  162      127      148        177
    SG&A                                                      (121)      (121)      (172)     (208)   SG&A                                         (30)     (26)     (30)       (35)
    DD&A                                                      (188)      (174)      (190)     (200)   DD&A                                         (42)     (44)     (44)       (44)
    Other operating expenses                                      -          -          -         -   Other operating expenses                        -        -        -          -
    Operating Income                                            462        301        579       882   Operating Income                               86       52       68         94
    EBIT                                                          -          -          -         -   EBIT                                            -        -        -          -

    EBITDA                                                      650        475       769     1,082    EBITDA                                       128       96       112       138

    Net interest income / (expense)                               3          3         4         4    Net interest income / (expense)                 0        1        1          1
    Income applicable to minority interests                       -          -         -         -    Income applicable to minority interests         -        -        -          -
    Pretax income                                              462        313       583        886    Pretax income                                  95       53       69         95
    Taxes                                                      (76)       (47)      (87)     (133)    Taxes                                        (15)      (8)     (10)       (14)
    Tax rate (%)                                             16.5%      15.1%     15.0%     15.0%     Tax rate (%)                               15.4%    15.0%    15.0%      15.0%
    Reported net income                                        330        265       495        753    Reported net income                            73       45       59         80
    Non-recurring items, disc ops                                 -          -         -         -    Non-recurring items, disc ops                 (8)        -        -          -
    Adjusted net income                                        386        265       495        753    Adjusted net income                            81       45       59         80
    Average diluted shares outstanding                         174        175       174        174    Average diluted shares outstanding           176      174      174        174

    EPS                                                        1.90    1.52         2.84      4.32    EPS                                          0.42    0.26    0.34         0.46
    EPS growth rate (%)                                     (40.2%) (31.6%)       87.2%     52.1%     EPS growth rate (%)                       (49.2%) (62.9%) (26.4%)      188.8%
    Dividend per share                                         0.00    0.00         0.00      0.00    Dividend per share                           0.00    0.00    0.00         0.00

    WTI crude price ($/bbl)                                        -          -         -         -   WTI crude price ($/bbl)                         -        -         -         -
    Henry Hub natural gas price ($/mcf)                            -          -         -         -   Henry Hub natural gas price ($/mcf)             -        -         -         -


    Balance Sheet and Cash Flow Data                        FY09A FY10E FY11E FY12E                   Ratio Analysis                            FY09A FY10E FY11E FY12E

    Cash and cash equivalents                                   763        500       500       500    Valuation
    Other current assets                                        145        137       191       209    P/E (adjusted)                              11.3     16.5       8.8        5.8
    Total current assets                                      1,164        948     1,123     1,180    P/CF                                           -        -         -          -
    Net PP&E                                                  4,890      6,044     6,654     6,954    Enterprise value/EBITDA                        -        -         -          -
    Other assets                                                 88         76        76        76    EV/DACF                                        -        -         -          -
    Total assets                                              6,143      7,068     7,853     8,210
                                                                                                      Ratios
    Total debt                                                1,162      1,874     2,135     1,725    Net debt/equity                                 -        -        -          -
    Total liabilities                                         1,885      2,543     2,833     2,436    Net debt/capital                            9.2%    23.7%    24.9%      17.9%
    Minority interests                                            -          -         -         -    Net coverage ratio                              -        -        -          -
    Preferred stock                                               -          -         -         -    ROE                                         8.9%     6.0%    10.4%      14.0%
    Shareholders' equity                                      4,258      4,525     5,020     5,773    ROCE                                        8.5%     5.0%     7.9%      11.0%

    Net Income                                                  330         265      495       753    Yield and cash returns
    DD&A                                                      (188)       (174)    (190)     (200)    CFPS                                            -       -          -         -
    Deferred taxes                                             (13)           2        0         0    CF yield                                  (9.2%) (21.4%)     (6.0%)      9.5%
    Other                                                         -           -        -         -    FCF yield                                       -       -          -         -
    Cash earnings                                                 -           -        -         -    Dividend yield                              0.0%    0.0%       0.0%      0.0%
    Change in working capital                                   146        (69)    (146)      (43)    Dividend payout ratio                           -       -          -         -
    Cash flow from operations                                   627         359      539       910    Buyback yield                                   -       -          -         -
    Capex                                                     (994)     (1,342)    (800)     (500)    Total cash returns (%)                          -       -          -         -
    Dividends                                                     -           -        -         -
    Share buybacks (net)                                          0           0        0         0
    Change in debt                                              468         712      261     (410)    Mkt Cap (current) ($bn)                     4.42
    Change in preferred stock                                     -           -        -         -    Enterprise Value (current)                 4,060
    Other uses of cash                                            -           -        -         -
    Change in cash                                               51       (263)        0         0

    Free cash flow                                            (381)      (982)     (261)       410

    Source: Company reports and J.P. Morgan estimates.
    Note: $ in millions (except per-share data). Fiscal year ends Dec




                                                                                                                                                                                   23
J. David Anderson, PE, CFA                                  North America Equity Research
(1-212) 622-6684                                            24 May 2010
jdavid.anderson@jpmchase.com




     Transocean: Summary of Financials
     Income Statement - Annual                               FY09A FY10E FY11E FY12E                    Income Statement - Quarterly              1Q10A 2Q10E 3Q10E 4Q10E

     Revenues                                                 11,556     10,431     11,800    12,210    Revenues                                    2,602      2,478      2,609      2,741
     Cost of products sold                                    (5,164)    (5,079)    (5,769)   (5,875)   Cost of products sold                     (1,196)    (1,253)    (1,288)    (1,342)
     Gross profit                                                   -          -          -         -   Gross profit                                     -          -          -          -
     SG&A                                                       (209)      (243)      (212)     (220)   SG&A                                          (63)       (57)       (60)       (63)
     DD&A                                                     (1,464)    (1,656)    (1,763)   (1,822)   DD&A                                        (401)      (409)      (418)      (428)
     Other operating expenses                                 (5,373)    (5,322)    (5,981)   (6,094)   Other operating expenses                  (1,259)    (1,310)    (1,348)    (1,405)
     Operating Income                                               -          -          -         -   Operating Income                                 -          -          -          -
     EBIT                                                       4,719      3,452      4,056     4,294   EBIT                                          942        759        843        908

     EBITDA                                                    6,183      5,108      5,819     6,116    EBITDA                                     1,343      1,168      1,261      1,336

     Net interest income / (expense)                           (479)      (526)      (441)     (340)    Net interest income / (expense)             (127)     (128)      (133)      (138)
     Income applicable to minority interests                       -           -         -         -    Income applicable to minority interests         -         -          -          -
     Pretax income                                             3,669      2,522      3,073     3,361    Pretax income                                 727       536        603        655
     Taxes                                                     (699)      (445)      (542)     (593)    Taxes                                       (128)      (95)      (106)      (116)
     Tax rate (%)                                             16.0%      15.0%      15.0%     15.0%     Tax rate (%)                               15.0%     15.0%      15.0%      15.0%
     Reported net income                                       3,183      2,472      3,073     3,361    Reported net income                           677       536        603        655
     Non-recurring items, disc ops                             (497)        (42)         0         0    Non-recurring items, disc ops                (42)         0          0          0
     Adjusted net income                                       3,669      2,522      3,073     3,361    Adjusted net income                           727       536        603        655
     Average diluted shares outstanding                          321        318        314       318    Average diluted shares outstanding            322       319        316        313

     EPS                                                       11.46        7.92      9.77     10.55    EPS                                          2.23       1.68       1.91       2.09
     EPS growth rate (%)                                           -           -         -         -    EPS growth rate (%)                             -          -          -          -
     Dividend per share                                         0.00        1.56      3.11      3.11    Dividend per share                           0.00       0.00       0.78       0.78

     WTI crude price ($/bbl)                                        -           -         -         -   WTI crude price ($/bbl)                          -          -          -          -
     Henry Hub natural gas price ($/mcf)                            -           -         -         -   Henry Hub natural gas price ($/mcf)              -          -          -          -


     Balance Sheet and Cash Flow Data                        FY09A FY10E FY11E FY12E                    Ratio Analysis                            FY09A FY10E FY11E FY12E

     Cash and cash equivalents                                 1,168        851      1,112     4,381    Valuation
     Other current assets                                        461        437        517       500    P/E (adjusted)                                5.2        7.5        6.1        5.6
     Total current assets                                      4,476      4,324      5,173     8,333    P/CF                                            -          -          -          -
     Net PP&E                                                 23,018     22,790     22,177    21,406    Enterprise value/EBITDA                         -          -          -          -
     Other assets                                              8,942      9,102      9,102     9,102    EV/DACF                                         -          -          -          -
     Total assets                                             36,436     36,216     36,452    38,841
                                                                                                        Ratios
     Total debt                                                9,849      7,931      6,000     6,000    Net debt/equity                                 -         -          -          -
     Total liabilities                                             -          -          -         -    Net debt/capital                           33.9%     27.7%      20.7%      10.4%
     Minority interests                                            -          -          -         -    Net coverage ratio                              -         -          -          -
     Preferred stock                                               -          -          -         -    ROE                                        19.8%     11.7%      13.0%      13.0%
     Shareholders' equity                                     20,559     22,513     24,611    26,984    ROCE                                       13.5%      9.6%      11.1%      12.1%

     Net Income                                                 3,183      2,472      3,073     3,361   Yield and cash returns
     DD&A                                                     (1,464)    (1,656)    (1,763)   (1,822)   CFPS                                            -         -          -          -
     Deferred taxes                                                13        (22)         0         0   CF yield                                        -         -          -          -
     Other                                                          -           -         -         -   FCF yield                                  13.0%     12.4%      17.3%      22.9%
     Cash earnings                                                  -           -         -         -   Dividend yield                              0.0%      2.6%       5.2%       5.2%
     Change in working capital                                    433      (396)      (520)       124   Dividend payout ratio                           -         -          -          -
     Cash flow from operations                                  5,598      3,924      4,316     5,307   Buyback yield                                   -         -          -          -
     Capex                                                    (3,052)    (1,399)    (1,150)   (1,050)   Total cash returns (%)                          -         -          -          -
     Dividends                                                      -           -         -         -
     Share buybacks (net)                                           0           0         0         0
     Change in debt                                           (2,637)    (2,309)    (1,931)         0   Mkt Cap (current) ($bn)                    19.86
     Change in preferred stock                                      -           -         -         -   Enterprise Value (current)                27,332
     Other uses of cash                                             -           -         -         -
     Change in cash                                               167      (279)        260     3,269

     Free cash flow                                            3,045      2,567      3,166     4,257

     Source: Company reports and J.P. Morgan estimates.
     Note: $ in millions (except per-share data). Fiscal year ends Dec




24
J. David Anderson, PE, CFA                                  North America Equity Research
(1-212) 622-6684                                            24 May 2010
jdavid.anderson@jpmchase.com




Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

•     Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for
      Diamond Offshore within the past 12 months.
•     Client of the Firm: Diamond Offshore is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI
      provided to the company investment banking services, non-investment banking securities-related services and non-securities-related
      services. Ensco plc is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company
      non-investment banking securities-related services and non-securities-related services. Pride International is or was in the past 12
      months a client of JPMSI. Transocean is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided
      to the company investment banking services, non-investment banking securities-related services and non-securities-related services.
•     Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking
      services from Diamond Offshore, Transocean.
•     Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment
      banking services in the next three months from Diamond Offshore, Ensco plc, Transocean.
•     Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other
      than investment banking from Diamond Offshore, Ensco plc, Transocean. An affiliate of JPMSI has received compensation in the
      past 12 months for products or services other than investment banking from Diamond Offshore, Ensco plc, Transocean.

Diamond Offshore (DO) Price Chart

           259
                                                                                                                                Date        Rating Share Price   Price Target
                                                                                                                                                   ($)           ($)
           222
                                                                                                                                03-Oct-06   UW     68.51         -
                                                             OW                   UW $50                               UW $87
                                                                                                                                13-Feb-08 N        108.14        -
           185
                                                                                                                                11-Apr-08   OW     125.67        -
                 UW                                     N                   UW                                         UW $92
           148                                                                                                                  13-Oct-08   UW     66.73         -
Price($)                                                                                                                        14-Jan-09   UW     60.03         50.00
           111                                                                                                                  06-Apr-10   UW     92.22         92.00
                                                                                                                                23-Apr-10   UW     85.43         87.00
           74


           37


            0
                 Oct                Jul                     Apr                    Jan                     Oct
                 06                 07                       08                    09                      09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Sep 08, 2009 - Apr 06, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the
current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.




                                                                                                                                                                         25
J. David Anderson, PE, CFA                                North America Equity Research
(1-212) 622-6684                                          24 May 2010
jdavid.anderson@jpmchase.com




Ensco plc (ESV) Price Chart

        144                                                                                                                     Date     Rating Share Price   Price Target
                                                                                                                                                ($)           ($)
        120                                                                                                                     03-Oct-06 N     41.65         -
                    UW                                                                UW $30                           OW $60   08-Jan-07 UW    48.36         -
         96                                                                                                                     09-Nov-07 N     54.74         -
               N                                N                       UW        UW $34                               OW $57
                                                                                                                                02-Sep-08 UW    67.78         -
Price($) 72                                                                                                                     14-Jan-09 UW    27.86         34.00
                                                                                                                                02-Mar-09 UW    22.11         30.00
         48                                                                                                                     06-Apr-10 OW    47.54         57.00
                                                                                                                                23-Apr-10 OW    50.16         60.00

         24


          0
              Oct                   Jul                    Apr                     Jan                     Oct
              06                    07                      08                     09                      09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Sep 08, 2009 - Apr 06, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the
current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.


Noble Corp. (NE) Price Chart

        120                                                                                                                     Date     Rating Share Price   Price Target
                                                                                                                                                ($)           ($)
        100                                                                                                                     28-Jan-08 N     44.82         --
                                                                                         N $28                                  14-Jan-09 N     22.39         29.00
         80                                                                                                                     04-Mar-09 N     22.56         28.00
                                                      N                            N $29                                N $49
                                                                                                                                06-Apr-10 N     43.09         49.00
Price($) 60


         40


         20


          0
              Oct                   Jul                    Apr                     Jan                     Oct
              06                    07                      08                     09                      09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Sep 08, 2009 - Apr 06, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the
current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.




26
J. David Anderson, PE, CFA                                North America Equity Research
(1-212) 622-6684                                          24 May 2010
jdavid.anderson@jpmchase.com




Pride International (PDE) Price Chart

                                                                                                                                Date        Rating Share Price   Price Target
           75                                                                                                                                      ($)           ($)
                                                                                                                                14-Jan-09 UW       15.47         16.00
           60                                                                                                                   06-Apr-10 N        31.63         33.00

                                                                                 UW $16                                N $33
           45
Price($)

           30



           15



           0
                Oct                Jul                    Apr                      Jan                    Oct
                06                 07                      08                      09                     09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Sep 08, 2009 - Apr 06, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the
current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.


Transocean (RIG) Price Chart

                                                                                                                                Date        Rating Share Price   Price Target
           306                                                                                                                                     ($)           ($)
                                                                                                                        N $87
                                                                                                                                03-Oct-06   UW      75.69        --
           255                                                                           N $60                         N $92    12-Sep-07 N         152.87       --
                                                                                                                                09-Jul-08   OW      145.94       --
           204 UW                          N                       OW              N $58                               N $95
                                                                                                                                14-Jan-09   N       52.01        58.00
Price($)                                                                                                                        04-Mar-09 N         55.59        60.00
           153
                                                                                                                                06-Apr-10   N       89.12        95.00
                                                                                                                                28-Apr-10   N       84.52        92.00
           102
                                                                                                                                17-May-10 N         64.99        87.00

           51


            0
                 Oct                Jul                    Apr                     Jan                     Oct
                 06                 07                      08                     09                      09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Sep 08, 2009 - Apr 06, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the
current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.




Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] J.P. Morgan Cazenove’s UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE
All Share Index, not to those analysts’ coverage universe. A list of these analysts is available on request. The analyst or analyst’s team’s
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.




                                                                                                                                                                         27
J. David Anderson, PE, CFA                      North America Equity Research
(1-212) 622-6684                                24 May 2010
jdavid.anderson@jpmchase.com




Coverage Universe: J. David Anderson, PE, CFA: Baker Hughes (BHI), Diamond Offshore (DO), Ensco plc (ESV),
Halliburton (HAL), Noble Corp. (NE), Pride International (PDE), Schlumberger (SLB), Transocean (RIG), Weatherford
International (WFT)

J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2010
                                                Overweight      Neutral     Underweight
                                                (buy)           (hold)      (sell)
JPM Global Equity Research Coverage             45%             42%         13%
  IB clients*                                   48%             46%         32%
JPMSI Equity Research Coverage                  42%             49%         10%
  IB clients*                                   70%             58%         48%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.



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28
J. David Anderson, PE, CFA                     North America Equity Research
(1-212) 622-6684                               24 May 2010
jdavid.anderson@jpmchase.com




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Copyright 2010 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan.


                                                                                                                                                      29
J. David Anderson, PE, CFA     North America Equity Research
(1-212) 622-6684               24 May 2010
jdavid.anderson@jpmchase.com




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