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UBS Warburg Downgrades Cal Dive to 'Neutral'


UBS Warburg downgraded Cal Dive (CDIS) to neutral from buy.

The energy services company sees breakeven fourth quarter vs. 19 cents earnings per share consensus, as the result of an establishment of about $10 million pre-tax reserves for disputed billings on a major construction project in Trinidad and for EEX litigation.

Analyst James Stone says he's concerned about steep pricing competition in the deepwater Gulf of Mexico in 2003 as a result of lower than expected activity, and unreasonable behavior by one of two financially troubled rivals. He says the oil and gas explorer and producer can either compete on price, work at no margin, or not cut prices amd run the risk that utilization will suffer.

Stone thinks growth in Cal Dive's Production Partnering business will be offset by weakness in its Deepwater Contracting operations. He cut the $1.38 2003 earnings per share estimate to $1.10, and cut the $2.48 2004 estimate to $2.08. He also slashed the $35 target to $23.50.


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