February 19, 2010 / 11:36 AM / 10 years ago

UPDATE 1-Morgan Stanley says positive on U.S. offshore drillers

Feb 19 (Reuters) - Morgan Stanley said it was incrementally positive on U.S. offshore drillers, citing a surge in jack-up rig demand, and named Ensco International Plc ESV.N, Noble Corp (NE.N) and Transocean Ltd (RIG.N) as its top picks in the sector.

The brokerage sees rig utilization going up to 85 percent by mid-year and 95 percent by year-end, if recent demand trends hold up. The current utilization stands at just under 80 percent.

“We expect jack-up utilization above 85 percent to provide a backdrop for firmer pricing, driving positive earnings revisions,” analyst Ole Slorer wrote in a note to clients.

By the back half of 2010, the analyst expects rig demand to outpace available supply.

Slorer, who raised both Ensco and Transocean to “overweight” from “underweight”, said he sees jack-up tendering activity at 49 rigs in the next quarter and 90 rigs the following quarter.

Shares of Ensco closed at $41.97 and those of Transocean closed at $83.32 Thursday on the New York Stock Exchange.

For the rating changes, please double click on [ID:nWNAB9428] (Reporting by Krishna N. Das in Bangalore; Editing by Aradhana Aravindan)

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