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Trinidad Drilling Ltd.'s (OTCPK:TDGCF) high debt load has been a focus of concern for investors over the past few weeks, but now that solid fourth quarter results suggest the company is is holding its own, some analysts are confident the debt won't derail Trinidad as it navigates through the economic downturn.

On Thursday, Trinidad reported a year-over-year increase in profit, thanks to an expansion of rigs and higher utilization rates. For the fourth quarter, net earnings were C$21.8-million, or C$.23 per share, versus C$17.9-million, or C$.21 a share, a year earlier.

Raymond James analyst Andrew Bradford said Trinidad's better than expected quarter highlights the operational strength of the company and distinguishes it from its competitors. He maintained his "outperform" rating and C$6.50 price target, saying the market will gradually move its focus towards Trinidad's operational attributes and away from its debt, which he predicts, isn't likely going away anytime soon.

He wrote in a research note:

In our view, if this oilfield downturn is persistent (we don't think it can be), then Trinidad will likely pay-down debt slowly once this year's rig construction program is complete - commencing in 3Q09. If, on the other hand the market begins to recover in 2010 (as we think it will have to) we expect Trinidad's customers will require it to construct the remaining six rigs (roughly C$60-70 million in residual costs), which means the current debt level will likely persist until roughly 2Q10.

Even if Trinidad's debt, among the highest of all North American drillers, does remain at its current level, UBS analyst Chad Friess is confident Trinidad can weather the storm. He notes to clients that 55% of net debt is comprised of convertible notes not due until 2012 and he sees very little risk of a covenant breach on the existing facilities.

He wrote, reiterating his "buy" recommendation and C$5 price target,

Further, we believe the company can complete is current build program without threatening the borrowing limit on its existing revolver. Coupled with a fleet that is 45% contracted for 2009 which provides firm earnings visibility, we are are comfortable with Trinidad’s liquidity position for the balance of the year.

Blackmont analyst Roy Ma, however, isn't so sure the market can leave their debt worries behind and reduced his price target from C$5.50 to C$4.50, while maintaining his "hold" recommendation.

He told clients:

Trinidad Drilling has better earnings visibility among the energy services stocks we cover. However, until TDG lays out a plan to address the repayment of its convertible debentures, we believe investors may shy away from the stock due to potential dilution.

Source: Trinidad Drilling: Analysts Confident That It Can Handle Debt Load