Description

Pride operates a large, diversified fleet of drilling rigs, both
domestically and internationally.

A brief summary of their fleet is as follows:

BY GEOGRAPHY

66% Gulf of Mexico
10% Latin America
6% West Africa
18% Other


BY ASSET CLASS

45% Jack-ups
14% Submersibles
3% Drillships
38% Other (including 200 land rigs)

Pride has a mix of older and newer equipment, but on balance would be
considered to have older, less capable equipment. It typical sells for
a discount compared to the "premium" drillers like ESV, GSF and NE.

Pride also has an above average amount of debt, although their balance
sheet is comfortable and their are no maturities for the next five years.

The reason to buy PDE here and now is quite simple: it has lagged it's
peer group substantially and is poised to make a good trading move.

Pride currently trades at around net asset value. It sells at a 30-50%
discount relative to its peer group, depending on the metric being used
(e.g, net asset value, replacement value, cash flow, price-to-peak
earnings. While some discount is warranted, the current discount is
overly wide, largely owing to the fact that the other drillers have
moved up sharply in recent months.


Ticker Current Price September Low

PDE $14.60 $9.82

ESV $28.40 $12.81

RDC $21.25 $11.10

GSF $31.70 $18.90

NE $20.80 $38.72


These are cyclical stocks. Their values are somewhat defined on both the
upside and downside. This is a good trade where I believe you can make
30-50% in a reasonable time frame (three months). Downside is probably
back to $12.

See below for catalysts.

Catalyst

Oil and gas prices are substantially firmer.
The peer group is trading much higher.
Utilization in the all important Gulf of Mexico has probably bottomed.
GSF turnkey bids, a good leading indicator of demand, are up sharply
in March to almost record levels.
IN THE NEXT WEEK THE COMPANY SHOULD ANNOUNCE THAT IT WON A TENDER FOR
FOUR RIGS FROM PEMEX (MEXICAN STATE OIL COMPANY).