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Sunday, October 26, 2008

Sector Snap: Shares of drillers slide with crude

For future reference - http://biz.yahoo.com/ap/081024/drillers_sector_snap.html?.v=1. Expect similar trends with local O&G stocks.


Sector Snap: Shares of drillers slide with crude
Friday October 24, 4:39 pm ET

Shares of oil drillers slide as crude prices tumble and broader markets fall on economic woes

NEW YORK (AP) -- Shares of oil drilling and exploration companies plunged Friday as the price of crude tumbled and the broader markets slid on concern about the global economy.

Light, sweet crude for December delivery fell $3.69, or 5.4 percent, to $64.15 on the New York Mercantile Exchange. The price has slid in recent weeks from an all-time high of $147.27 reached on July 11.

And natural gas for January delivery fell 13.9 cents, or 2 percent, to $6.747 per 1,000 cubic feet on the Nymex. Prices for the cooking gas had been above $10 per 1,000 cubic feet last summer.
When energy prices are high, oil and natural gas exploration becomes more lucrative. However as prices fall, generally so does the incentive to explore new areas, and with it potential new sources of revenue for the sector.

Shares of Diamond Offshore Drilling 1.15, or 1.6 percent, to $72.58; shares of Noble Corp. fell $1.84, or 6.6 percent, to $25.90; and shares of Ensco International Inc. fell $2.24, or 6.5 percent, to $32.34.

All three posted increases in their third-quarter net income earlier this week.

"Although uncertain commodity prices will lead to volatility in the daily stock prices, the long term outlook on all three companies remains very solid," Pritchard Capital Partners analyst Brian Uhlmer said in a note to clients.

Elsewhere in the sector, shares of Schlumberger Ltd. fell $4.52, or 8.7 percent, to $47.52; shares of Cameron International Corp. fell $1.63, or 7.1 percent, to $21.29; and shares of National Oilwell Varco Inc. lost $1.28, or 4.8 percent, to $25.50.


Some stock charts for your reference:

Diamond Offshore Drilling (DO) - http://finance.yahoo.com/echarts?s=DO#chart1:symbol=do;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Noble Corp (NE) - http://finance.yahoo.com/echarts?s=NE#chart1:symbol=ne;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Ensco International Inc. (ESV) - http://finance.yahoo.com/echarts?s=ESV#chart1:symbol=esv;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Schlumberger Limited (SLB) - http://finance.yahoo.com/echarts?s=SLB#chart1:symbol=slb;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Cameron International Corporation (CAM) - http://finance.yahoo.com/echarts?s=CAM#chart1:symbol=cam;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

National Oilwell Varco, Incorporated (NOV) - http://finance.yahoo.com/echarts?s=NOV#chart1:symbol=nov;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

1 comment:

Seng said...

From: http://www.fool.com/investing/general/2008/10/24/is-offshore-drilling-washed-up.aspx


Is Offshore Drilling Washed Up?
By Toby Shute

October 24, 2008

"There just seems to be a complete disconnect between the health of the business and what's going on the marketplace."
- Dan Rabun, Chairman/CEO of Ensco International (NYSE: ESV)

I figured I'd lead off with that quote, since it summarizes this offshore driller's situation quite succinctly. Ditto for competitors like Diamond Offshore (NYSE: DO) and still-seaworthy Noble (NYSE: NE).

Given the latest Friday freakout, I'm not sure anyone really cares about what happened in the third quarter, but it was naturally a good one for Ensco, considering the tightness in offshore drilling markets around the world. Per-share earnings from continuing operations were up 20%. Neato.

So business is in shambles now that oil prices have been cut in half, right? The share price seems to say so. But the facts are quite different: Ensco has 95% contract coverage for fourth-quarter revenue. So I guess 2009 is where this all falls apart?

Well, no. 2009 is actually when a lot of great things start happening, including three newbuild deepwater vessels beginning new multiyear contracts. Chevron (NYSE: CVX) gets the ENSCO 7500 down in Australia. Then the ENSCO 8500, the first of seven in a new line of a spiffy submersibles, heads to the Gulf of Mexico for Anadarko (NYSE: APC) and Eni (NYSE: E). Finally, the ENSCO 8501 starts drilling for Nexen and Noble Energy in the third quarter next year. As we learned from National Oilwell Varco (NYSE: NOV), the top shipyards are cash-rich, and I just don't see these major offshore projects running up on the rocks.

For 2009 and beyond, 85% of customers are either investment-grade companies or national oil companies. These people won't pack up and leave at $50 to $75 oil. If we go lower, things will get hairy, but so far, there's just no sign of the offshore implosion that today's share prices seem to signal.