Seadrill Limited (SDRLF.PK)

Dear Bottarelli Research Member,

This week, we’ll dive into a company whose timing could not be better.

You see, the vast, un-tapped oil reserves that are known to exist right off our own shores have both Senator McCain and President Bush stressing the need to lift the offshore oil drilling ban in the United States.

Due to out-dated restrictions, we have not been using a special technique called “Slant Drilling” to recover this easily-accessible oil. In fact, when these restrictions were put into affect, oil was trading around $25-$40 a barrel. I think this puts the entire situation into perspective – and it’s now time to get with the program and change these regulations.

After all, if we do not address the global oil and energy situation very soon, it’s going to get ugly a lot faster than anyone wants to admit. In fact, back when Mel Gibson was an actor, he starred in a movie called Mad Max where gangs fought for control of goods, gas, and oil. It was a far-fetched concept when the movie was released back in 1979, but I can’t help but admit that it’s making a whole lot of sense right about now.

As you know, we have carefully positioning our small-cap portfolio in stocks that are geared towards these unwinding events, and this philosophy has been incredibly successful. So this week, we’ll continue this strategy by looking into an unknown small cap who is an expert in deep water drilling. This is indeed the next wave of finding oil and gas, and the company I’m giving you this week is an international offshore drilling contractor with offices in Norway, Singapore, and the UK – making them a true Wall Street secret.

But they won’t remain a secret for long…

After all, their mobile drilling fleet is considered one of the most modern in the world, primarily because it focuses on technically demanding segments of the offshore drilling industry. Not only that, but they are also a global leader in high-specification and harsh-environment drilling, and they have some major ties with the big boys in the oil sector. One of these major ties is a new multi-billion dollar deal with Bryan’s favorite, Petrobras from Brazil. They just signed to a 6-year contract with PBR, and oh how I love to see this type of arrangement. So should you!

But the story does not stop there. This gem also provides platform drilling, engineering, and well intervention services – all of which are in high-demand to maintain the longevity of oil wells across the globe. And the deeper the wells are, the more expertise and maintenance is needed. Folks, today’s small-cap gem is one of the world’s best.

Best of all, they’re not newcomers. They’ve been involved with major discoveries with Shell, Statoil, and BP in the North Sea – and as I researched all of their other working relationships over the year, I couldn’t help but think that the list was impressive. Now get this: They were involved with some of the very first drilling in 1977 as a key player with Unocal, so as you can see they have been heavily involved in high-end oil drilling for a long, long time. But they still go unnoticed on Wall Street. (You’ll see why in a moment!)

Something else that caught my eye was the fact that this company has also been actively trying to buy up smaller oil drillers to expand their operation and bottom line. As I looked through the information, I quickly realized that they’re the most “under the radar” deepwater driller I’ve ever come across. After all, everyone knows Wall Street favorites like Transocean (RIG – NYSE) and Diamond Offshore (DO – NYSE), but nobody knows about the company I’m about to reveal to you today. That’s a big opportunity.

In terms of deepwater drilling, the incredibly high barriers to entry means that there are not too many drillers to go around. And let’s face it, deepwater drilling is going to be the next wave in finding the oil reserves that our global population so badly needs.

All told, this company has proven themselves on a global scale, they continue to ramp up their business operations in 15 countries on five continents, and they’ve hooked up with major oil companies (like Petrobas). Then, toss into the equation the fact that U.S. leaders are now pushing for new offshore drilling initiatives here in the USA, and it becomes crystal clear that the time to add this company to our small-cap ledger is now. I personally feel that we’re only in the first inning of this new type of exploration, and it’s definitely time to be on board.

On that note, this week’s pick is Seadrill Limited (SDRLF.PK). The company just started trading in the U.S. markets last year, and therefore they’re flying way under the radar. Any move to the AMEX, NASDAQ, or NYSE would shoot this gem into the forefront, blasting shares aggressively higher. But in the meantime, their expertise and rapidly-expanding revenue base in the deepwater drilling sector is why we want to own them. I truly feel that deepwater drilling will be the new oil frontier over the next 5- 8 years, so let’s establish a position in Seadrill at or under $33.00. With a number of upside catalysts in place, everything is aligned for another explosive winner.

UPDATES

Since we covered our entire small-cap portfolio last week, there isn’t much to cover in today’s alert. However, we did see some interesting (and profitable) moves over the last week, so I’ll quickly address them for you below…

Northern Oil & Gas (NOG – AMEX): Besides climbing higher this week, NOG announced that they’ve entered into an agreement to purchase certain oil and gas leases covering approximately 24,000 net acres in Dunn County, North Dakota. With this addition, NOG now holds 60,000 net acres in North Dakota’s Bakken formation. Folks, this is a major maneuver for NOG. Not only that, but I also want to alert you that NOG will get added to the Russell later this month, and that’s a bullish catalyst as well. As Bryan and I have been saying, the Bakken Field is huge, and both BEXP and NOG are going to move a lot higher as the drills turn and news continues to flow. Both NOG and BEXP could be the most influential plays we’ve uncovered, and both of them should be core holdings in your small-cap ledger. Hold.

Gran Tierra Energy (GTE – AMEX): While doing my standard due diligence over the weekend, I picked up on a well-known newsletter editor who has just now initiated coverage on GTE. Oh how I love this, especially when he’s recommending a buy at much higher levels than what we paid! As you know, we’re up 142.548% on GTE since March 17^th, and this “tout” said that he expects GTE to move up to $12.00 in short order.Now, if you see the stock hit $12.00 off the momentum of this new buy recommendation, I want you to take another fourth of your money off the table. After all, we can always buy back into the position on any pullbacks. Don’t get me wrong, we want to own GTE for the long haul, and I still feel it’ll surprise a lot of investors. Therefore, I still consider it a core investment in our small-cap portfolio. But on the same hand, we also need to be opportunistic when situations like this come along, and that involves continuing our strategy of taking our tremendous profit off the table on any big pops. That’s just smart trading! Sell a fourth of your position at or above $12.00.

Potash One (KCLOF): This pick has handed us a 54% return since recommending it in May. In this market, that’s an exceptional return. Therefore, let’s go ahead and take half of our profits off the table, and let the remaining half continue to run higher. Sell half of your position, and hold the remaining half.

International Coal Group (ICO – NYSE): Another new high! Our undervalued coal play continues to move higher, and as production from their mines comes online later this year, I expect to see even more upside. With shares up 68.68% in just over a month, make sure you own this future high-flyer! Hold.

Uranium Energy (UEC – AMEX): This week, UEC reported that their monitoring wells have been completed for their first production area. They have also invited the Texas Commission on Environmental Quality (TCEQ) to observe the sampling procedure and split water samples. Analysis of the water will be used to define the baseline quality of the groundwater in the first production area. This is a critical step, and a blessing from the commission should allow UEC to advance towards production. As I have mentioned before, I expect uranium to receive a lot more attention as oil stays at these levels. Buy.

Genoil (GNOLF.OB): I finally had the privilege to speak directly with Genoil’s CEO, David Lifschultz. Folks, I have to tell you, I came away from our conversation realizing this man is not only brilliant, but Genoil is a stock that we need to stick with. David told me that he’s not only cutting staff, but he’s also taking his engineers (who know the technology better than anyone else) and putting them in charge of marketing and sales. This not only puts a more knowledgeable salesmen in front of a customer, but it also cuts costs. After speaking with him at depth, his major goal is to bring his company’s technology to center stage as quickly as he can. Heavy oil conversion is going to come into play very soon, and I feel that Genoil’s technology is unlike anything else in the world. Please review our original alert on Genoil from February 2^nd 2008 for further details. On that note, I also believe we should buy this dip and give the company the time to bring their world-class technology to fruition. Buy.

As a side-note to my conversation, David also mentioned that he is involved with ROMlight, a technology company that uses ELON to save energy. As you know, we own ELON in our small-cap portfolio, and this is just another real-life example of ELON’s platform saving energy and money for all the companies that use it. So in a way, my call offered continued bullishness on ELON as well!

As you can see from all of our recent gains, we have really been working hard for you behind the scenes, and over the next several weeks, we plan to have even more great plays coming your way. So have a fantastic week, and as always, please give thanks for the abundance in your life.

Sincerely,

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Introducing The Best Deep-Water Oil Driller You’ve Never Heard Of…

“Petrobras will have to pay dearly to expand its use of drilling rigs, which are in short supply these days. On Monday, Petrobras awarded Norway’s Seadrill (SDRL.PK) with contracts worth up to $4.1 billion for deepwater rigs.”

- Business Week, April 16, 2008

One of the magazines I typically pick up at the Barnes and Noble newsstand is a publication called Trader Monthly.

Within these pages, the editors typically list the top-performing hedge fund managers, CBOE floor traders, and various trading strategies for the upcoming month. As I skim through these articles, one name I’ve come across on frequent occasions is John Burbank of Passport Capital.

And no wonder. John’s $4 billion fund generated a 200% return last year.

When it comes to his secret for effective investing, his comments are quite simple. He says, “We prefer large-cap drillers who have tremendous leverage to greater exploration offshore."

His picks in this category include Transocean (RIG – NYSE), Pride International (PDE – NYSE), and a tiny company listed on the pink sheets called Seadrill (SDRLF.PK).

This sets the tone for today’s small-cap pick…

As Mark mentioned above, Seadrill is an international offshore drilling contractor that provides drilling and well-maintenance services. All told, Seadrill has 43 drilling units (16 of which are under construction). Their versatile fleet includes harsh-environment semi-submersibles, jack-ups, shallow and deepwater tender rigs, and deepwater drill ships (pictured below).

To be honest, prior to Mark’s research, I had never even heard of Seadrill. After all, since Seadrill is listed on the Oslo Stock Exchange (Norway) and just became available to trade in the U.S., I suspect that 99.9% of investors aren’t even aware that this company exists. But the more I studied the company, the more I liked them. For example, just look at their Q1 2008 highlights and you’ll see that this is a company that’s quickly on the move. Check it out:

SEADRILL Q1 2008 HIGHLIGHTS

• Reported net income of $263 million and earnings per share of $0.66.
• Took delivery of two semi-submersible rigs, one jack-up, and one tender rig.
• Secured contracts worth $4.1 billion with Petrobras in Brazil for three deepwater semi-submersible rigs. (This is a HUGE deal.)
• Received a $148 million gain on the sale of shareholding in PT Apexindo Pratama Duta TBK.
• Distributed a cash dividend of $0.60 per share.
• Received an $850 million sale and leaseback with Ship Finance for their West Polaris drill ship.

In addition to these Q1 highlights, Seadrill also announced several new contract extensions. The monster deal, as indicated above, was their $4.1 billion deal with Peterobras (PBR – NYSE).The deal calls for a six-year contract for Seadrill to providePetrobras withdeepwater semi-submersible drilling rigs (called West Taurus, West Orion, and West Eminence) with agreed day-rates of $630,000 for West Taurus and $600,000 for West Orion and West Eminence. In addition, Seadrill will also receive a fixed mobilization fee of $45 million (plus fuel reimbursement) for the transit period for each of the rigs.

As you probably know from my Options and LEAPS services, I feel that PBR is the top large-cap oil play that your investment dollars can buy today. So it only make ssence that we own shares in the small-cap oil drillers supporting PBR’s mind-blowing potential.

And get this: The PBR deal, while huge, was only one of a number of new arrangements Seadrill recently secured. Their other deals and day-rates are as follows:

• January 2008: StatoilHydro exercised the option to extend its contract for the heavy duty jack-up drilling rig called West Epsilon by one year at a day-rate of $317,000. The contract with StatoilHydro now extends until November 2010.
• January 2008: Seadrill secured a three year assignment in their jack-up drilling rig in Southeast Asia, with a day-rate of $150,000.
• April 2008: ExxonMobil exercised the option to extend its contract for West Aquarius from three years to four. The revised day-rate over the full contract period is $513,000. In addition, ExxonMobil has awarded Seadrill one additional year to the existing three-year contract for West Polaris. The day-rate for the additional year is $602,000.
• April 2008: Seadrill’s Teknik Berkat rig was awarded a four-year contract by Petronas Carigali for operations in Malaysia with an agreed day-rate of $125,000.
• May 2008: Seadrill’s new West Ariel rig received a letter of award for a two-well assignment for PTT Thailand with an agreed day-rate of $182,500.

With strong and consistent revenues like this, Seadrill’s time on the pink sheets will not last long. Shares should move to the AMEX, NASDAQ, or NYSE any time now, and that’s when investors will truly take notice of this remarkable “under the radar” driller.

But to be honest with you, a possible move to another exchange is a secondary trigger. In other words, Mark and I both expect Seadrill to hand you extraordinary returns even if they don’t move to a major market index. After all, those who have known about Seadrill have made tremendous returns, and now it’s time for us to join the party. The stock is severely under-followed, offering us a great opportunity to add shares to our position. Let’s take advantage of this powerful opportunity and buy Seadrill now!

PLAY: Buy shares of Seadrill Limited (SDRLF.PK) at or under $33.00, good for the week.

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Sincerely,