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Ahead Of The Bell: Oil Services

The Associated Press

SIOUX FALLS, S.D. (AP) — Demand deterioration for shallow water mat rigs is exceeding already depressed expectations, a Citi Investment Research analyst said Wednesday.

"A significant number of rigs are expected to go idle and ample high-spec newbuild supply will likely prevent many from returning to service," Robin Shoemaker wrote in a research note.

Shoemaker kept a "Sell" rating on Houston-based Pride International Inc. with a $12 target price.

He said day rates for Pride's U.S. Gulf of Mexico mat jack-up fleet, which started to weaken late in 2006, have rebounded recently.

"However, the recent credit crunch and decline in U.S. natural gas prices is expected to lead to lower activity levels in 2009," Shoemaker wrote.

Pride International shares, which closed at $19.69 on Tuesday, have traded between $11.38 and $48.86 during the past year.

He also kept a "Sell" rating on Hercules Offshore Inc. with a $1 target price.

Shares of Houston-based Hercules, which closed at $1.77 on Tuesday, have traded between $1.07 and $39.47 during the past year.