Positive On the Offshore Drillers Following Transocean-GlobalSantaFe Merger

Transocean (RIG) and GlobalSantaFe (GSF) have announced an agreement to merge, becoming a giant in the offshore industry with 146 rigs. We note that the expected merger is not about improving brand, as both companies have respected and solid branding in the offshore industry. This merger is about 'being big and great!'

We believe this merger to be completed in-tune with the philosophies of both companies, and will position the merged entities as a focused player to services their client bases that have been already consolidated in the past couple of years.

With a combined backlog of $33 billion, the merging company will be in a solid position. This merger will also strengthened a key focus area by offering 'technological centers of excellence' in the growing demand for deepwater and ultra-premium rigs. This is an area that will definitely be dominated by this alliance! In terms of the overall combined operations and scale, we believe that the benefits from both companies’ clients would remain relatively small in the medium term. Our assumption is based on the superb service both companies already offered to their clients.

The market should not be surprised by this announced merger (since this is in-line with management philosophy). However, the market should be surprised by our expectation of a merger between Noble Corp. (NE) and ENSCO (ESV) which has not yet materialized (see report entitled 'Let's talk consolidation' dated June 16, 2005).

This was a smart and focused merger. We applaud the management of RIG and GSF for 'being big and great'. Our investment rating of Buy, High Risk is unchanged for RIG and our Hold, High Risk for GSF also remains unchanged.

We are positive on the Offshore Drillers and our 2007 focus remains the more balanced premium, mid-water and deepwater players.

The above material has been prepared by The Zephirin Group, Inc. for informational purposes only and should not be construed as an offer to sell or solicitation of an offer to purchase or subscribe for any investment.