Superior Energy Services Inc. (fka SPNR)

[frogfan]

Superior Energy Surges on Gulf Project


Thursday January 3, 12:19 pm ET
By Adam Schreck, AP Business Writer
Superior Energy Services Shares Jump to Record High After $750 Million Contract


NEW YORK (AP) -- Shares of Superior Energy Services Inc. jumped to an all-time high Thursday after the oilfield service provider won a major contract to clean up damaged drilling rigs in the Gulf of Mexico.
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Under the terms of the fixed-price, $750 million deal, the company's Wild Well Control Inc. subsidiary will decommission seven downed platforms and plug related wells for BP PLC, Chevron Corp. and Apache Corp. The contract is expected to take three years.

In a conference call with Wall Street analysts, Chairman and Chief Executive Terence Hall said preliminary work has already begun on the project, which is being carried out 85 feet to 135 feet underwater.

The project will gradually ramp up during the first quarter and be fully under way by the second quarter, Hall said. The three-year time frame could change depending on how work proceeds.

"There is certainly a chance we can complete this in less than three years," Hall said.

Lehman Brothers analyst James West called the contract "significant," noting that removal of each of the platforms damaged in the 2005 hurricanes will cost more than $100 million apiece. By comparison, removing an undamaged platform in the Gulf costs only about $2 million to $2.5 million, he said in a note to investors.

"The size of this award confirms the longevity, complexity and scope of the hurricane-related repair work that needs to be completed," he said. West rates the company "Overweight."

About 80 to 90 of the 113 rigs damaged by Hurricanes Katrina and Rita still need to be decommissioned, Capital One Southcoast Inc. analyst Kelly Chancey estimated.

Hall said other potential Gulf of Mexico projects exist for the company. But he stressed that Superior is looking for opportunities in other markets as well.

"This type of work comes about all over the world, all the time. Not just the result of hurricanes," he said. "At the end of the day, they all require the same type of expertise."

Stifel Nicolaus & Company R. Thaddeus Vayda estimated the Gulf of Mexico project could stretch Superior's well intervention profit margins by 40 percent. That would add about 58 cents to his 2008 profit-per-share forecast, which he raised 17 percent to $3.93 per share. He rates Superior at "Buy."

Shares of Harvey, La.-based Superior surged $6.11, or 17.1 percent, to $41.95 in midday trading. The stock earlier traded as high as $41.98.