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Six analysts and top management from four sector firms examine the Oil Services & Equipment sector in this 50-page Oil Services & Equipment Issue from The Wall Street Transcript, available at (212/952-7433) or www.twst.com.

TWST: Michael, why has the industry been so slow to pick up the pace of drilling in light of pricing?

Mr. LaMotte: Allen addressed the concerns about the sustainability of commodity prices. Beyond that, however, I would simply add that global business investment in general was very, very sluggish in the first quarter because of geopolitical uncertainties. So even as US natural gas storage fundamentals improved earlier this year, there really seemed to be a reluctance to ramp up drilling activity aggressively in the face of economic uncertainty. So far this year, the gas rig count has increased by 190, but 75% of those rigs have been added since mid-March.

TWST: Michael, as we look out from here, following this little pickup that we’ve seen recently, what’s the outlook? What do you expect for the industry over the next 18 months?

Mr. LaMotte: I think the trend toward higher activity levels is pretty well established. For example, in the US the rig count averaged 897 in the first quarter. We expect that to grow about 20% by the fourth quarter of this year to an average of 1,075. Canada, after a near-record first quarter, is going through its seasonal decline, but should ramp up healthily in the second half of the year. We expect a year-over-year increase in Canada of more than 30% in Q4. Europe, we expect, will grow about 10% from Q1 to Q4. Part of that growth is seasonal, but part of it should prove more secular. The major oil companies, in particular, are beginning to increase activity on those fields they have not earmarked for divestiture. The Middle East, we expect, will be about flat Q4 over Q1. And activity in Africa and Latin America should both experience rig count growth of about 20% from Q1 to Q4. So overall, the rig count worldwide should grow on the order of 6%-8% over the course of the next three quarters.

TWST: What is it about Transocean (NYSE:RIG) that you like?

Mr. LaMotte: They have nearly $800 million in free cash flow this year, the lion’s share of which will go toward paying down debt. This alone should allow more than $2 per share of enterprise value to accrue to equity holders. The timing of the IPO of their shallow water Gulf of Mexico unit TODCO is looking better as well, given what’s going on in the US gas market. In our view, getting that deal behind them not only helps improve the balance sheet, but also should ultimately clean up the Transocean story from an asset and regional perspective. Part of the difficulty for this stock has been its size and diversity of assets. It has been branded “neither fish nor foul.” When the US Gulf of Mexico jack-up market looks good, Transocean lags because of its label as a deepwater play. But when the deepwater market improved last year, investors were saying, “Yes, but what about the Gulf fleet?” So the story becomes cleaner: Transocean, after its divestiture of TODCO, becomes a high-end floater and international jack-up company, much like Noble and GlobalSantaFe (GSF), to which it trades at a discount.

This special issue includes:

1) Oil Services & Equipment - In an in-depth (9,500 words) Roundtable Forum, G. Allen Brooks, Executive Director of Oilfield Service Industry Research at CIBC World Markets, Pierre E. Conner III, an Analyst at Hibernia Southcoast Capital, C.K. Poe Fratt, an Analyst at A.G. Edwards and Michael K. LaMotte, a Managing Director at J.P. Morgan Securities, examine the outlook for the sector and share specific stock recommendations.

2) Oilfield Services Companies - In an in-depth (4,600 words) Analyst Interview, Robert Mackenzie, an Analyst at Friedman, Billings, Ramsey Group, examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Oil & Gas Services Companies - In an in-depth (4,600 words) Analyst Interview, Michael Urban, Senior Analyst at Deutsche Bank, examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of four - sector firms examine the outlook for their firm and the sector. Firms include:

Rowan Companies, Input/Output, Kinder Morgan, Natural Gas Services Group