This year marked a milestone in the energy crisis, when the federal government lifted the executive ban on offshore drilling, and suggested opening the Arctic National Wildlife Preserve, lifting restrictions on oil shale leasing, and easing regulations on oil refining. Although there is some opposition in congress to these ideas, a recent survey showed that 73% of all Americans are in favor of increasing offshore drilling. The market has already seen an ease in tension with a drop in the price of oil.
The trend to ease regulations presents enormous opportunities for growth in the energy sector. It is providing a new avenue of revenue for big companies like EXXON ((XOM), CONOCO PHILLIPS (COP), and CHEVRON (CVX). Mid cap companies and even some new comers that are in oil drilling and related services business are seeing their profits increase.
DIAMOND OFFSHORE DRILLING (DO) offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semi submersible and jack-up markets. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies and government-owned oil companies. With an order backlog of $11 billion, Diamond offers a solid level of earnings and cash flow visibility.
ROWAN (RDC), with a fleet of 21 offshore drilling rigs, operating in the Gulf of Mexico, the North Sea, and off the eastern coast of Canada, is a major provider for international and domestic contract drilling services. Their third quarter profits jumped 50%, and their revenue rose 20%.
One of the largest companies to benefit from offshore drilling is TRANSOCEAN (RIG), the biggest provider of rigs and platforms. They operate worldwide with a fleet of 130 offshore drilling units, and have had an average ROE of 23.4% in the last three years. Recently shares were up .5% or $.76 to $145.69.
The largest global drilling contractor, NABORS (NBR), is involved with most of the significant oil and gas markets in the world. They had a 68% increase in income for the fourth quarter. Shares rose 1.6% or $.69 to $43.24
CANO PETROLEUM (CFW) uses advanced recovery equipment to tap additional oil from mature US fields, and promises growth to shareholder profits. Currently selling for $5.43/share, analysts predict a $9-$14/share price range in the next 12 months.
PARKER DRILLING (PKD) is an international provider of contract drilling and related services. During the year ending December 31, 2007, the Company’s revenues were derived from three segments: United States barge drilling; international land drilling and offshore barge drilling, and drilling-related rental tools. With increased drilling come increased profits. With a current price of $8.53, analysts give it a strong buy, and predict a $10-$11 price range in the next twelve months.
The energy crisis will probably last for years to come, and unless you think that oil will go down to $70 a barrel again, there will be plenty of opportunity for growth, and therefore, profits! You can still capitalize on the increased need for oil, and the products that make it possible to find it, drill it, and refine it.