New rules for offshore drilling under consideration in Congress could create major competitive advantages for offshore contract drillers that have heavily invested in modern drilling fleets in recent years. According to The Wall Street Journal, legislation designed to prevent future oil spills set minimum standards for blowout preventers (BOP) that could render older drilling rigs obsolete or, at a minimum, require expensive retrofitting. Read this article for more information.
As we discussed in our recent article on National Oilwell Varco, the financial markets have been reacting to the Deepwater Horizon disaster by punishing the stock prices of nearly every company associated with oil and gas exploration in the Gulf of Mexico. In certain cases, the market reaction may be justified by deteriorating fundamentals and in other cases, stocks may be under pressure based on confusion, uncertainty, or merely “guilt by association”. The current situation in the Gulf of Mexico is a national disaster but is it reasonable to believe that this rich domestic source of oil and gas will not be tapped in the future? The job of the value investor is to look at these types of situations as opportunities and to identify cases where Mr. Market may have overreacted. In this article, we take a look at Noble Corporation.
Recent events in the Gulf of Mexico have increased awareness of the risks facing oil exploration companies operating in very deep waters. Drilling for oil beneath five thousand feet of water entails challenges that test the abilities of exploration companies under the best of circumstances. We are now witnessing the impotence of industry or government to deal with a well that has been gushing out of control for over a month. The current moratorium on deepwater drilling in the United States could be adopted by other countries as well and we cannot predict the duration of the moratorium. In this environment, is any investment in oil exploration or ancillary products and services worthy of consideration? This article examines National Oilwell Varco, one of the firms in the oil supplies and services industry.