Offshore Drillers Feel Urge to Merge

Source: Seeking Alpha, Toby Shute (11/3/10)

"Deepwater drilling market has a very bright future."

Earlier this month, colleague Josh Wilburn posed the question, "What Will Seadrill Buy Next?" That's proven timely, as Pride International is reportedly seeking strategic alternatives, with Seadrill and Ensco tipped as the most likely merger partners. Apparently, Noble passed on the deal.

Speculation surrounding a sale of Pride is nothing new. Seadrill built a ~10% stake in the company in 2008 and still holds it. Pride has increased its attractiveness as a takeover target by jettisoning its undesirable mat-supported jack-up business, Seahawk Drilling, last year. That spinoff left the firm quite leveraged to the deepwater drilling market, which has a very bright future barring an unexpected oil-price collapse.

Ensco and Seadrill have squared off recently. In May, Ensco made a partial tender offer for the shares of Scorpion Offshore. Seadrill trumped this offer (with a modest 1.25%/share premium) and picked up the company.

Seadrill is by far the more aggressive industry consolidator. Its chairman has even spoken about combining with industry heavyweight Transocean (NYSE:RIG; SIX:RIGN), making clear that no target is too ambitious. I would definitely tap Seadrill as the most likely Pride partner. Pride itself said Seadrill's high-quality assets would be a good strategic fit.

Struggling Seahawk is looking at asset-sale transactions, recapitalization, sale or merger. It's hard to imagine any current operator would buy or merge with Seahawk, given the near-term drag on performance. A financial sponsor of some sort might see the merits of eating some losses with an eye to rebound a year or two down the line. As I've outlined in the past, Seahawk's earnings power under such a scenario could make the shares worth >$20. The problem is that such a rebound would require a return of demand for the drilling of shallow-water GOM wells—not the deep-shelf variety McMoRan Exploration is targeting.

Announcing Streetwise Live! Events
Source: Streetwise Reports (07/13/2020)

Streetwise Reports is offering 100 investors—at no charge—the opportunity to meet via Zoom with executives of precious metals companies as they discuss recent developments at their companies and upcoming catalysts.

"China's export quota could be opportunity for Canadian miners"

Latin America: Six Gold Juniors Amass 100M+ Ounces
Source: Marc Davis, BNW News (05/25/2010)

Latin America, the world's last great mineral frontier for prolific gold discoveries, is proving a godsend for some lucky investors.

Mexico: Gold's Next Powerhouse Player
Source: Marc Davis, BNW News (11/03/2009)

As the world's key gold producing nations struggle mostly in vain to replenish dwindling below-ground supplies, Mexico is bucking the trend in a big way.

Where Have All the Gold Mines Gone?
Source: Brent Cook, Exploration Insights (04/14/2009)

Given the declining global gold production, mining companies’ demand for reserve replacement and the acute dearth of new gold discoveries, there is no doubt that real economic discoveries will be exceptionally valuable. . .the opportunity for stellar profits is the best it has probably ever been. Identifying the few successes, however, will require vigilant and constant technical assessment of geology and drill results, always with an eye to mine economics.

Congo Completes Mining Review, Says Majors Quit Talks
Source: Reuters (12/20/2008)

"Review process is extended an additional 45 days to allow six companies to return to the negotiating table for direct talks with government ministers."

I haven’t spoken to my old mining stock friend, noted and universally respected gold stock guru, Bob Bishop, about Rare Element in a year, but I hear he is still a supporter and very large shareholder. I don’t believe he will hold it against me to remind you that this was one of his favorite holdings when he left the newsletter writing business. . .

It's Only the Beginning for Uranium
Source: www.financialinsights.com (06/03/2005)

Dr. Richard S. Appel, author of Financial Insights, first became bullish on uranium in mid-2003, when it appeared obvious that its supply versus demand equation was fated to seriously drive higher its price. Since then, a series of events in the uranium industry has led Appel to believe that uranium prices will reach never before seen levels.

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