Trading Stocks of Offshore Drillers?

Question

from the research that I've done, off-shore drillers such as Noble (NE) and Transocean (RIG) appear to be a pretty decent long-term investment. there aren't that many companies in this segment and all of the off-shore drillers have long-term contracts which guarantee money well into 2010 and beyond

however, in the last month, their share values have taken a nose-dive with the reduction in oil prices. Noble Corp released their earnings which beat analysts predictions and Transocean announced a merger with Global Santa Fe.

Does anyone think it's worth buying these stocks for the long run (next 12 - 18 months) , or is the energy bubble beginning to show signs that it is leaking?

Thanks

Answer 1

The price of oil will continue to fluctuate (downwards as well as upwards).   With a 12-month horizon the investment is more problematic than what I would consider the long-term (5 years).

With a true long-term approach I think the drillers are worth investing in.  I have held Noble for a couple of years and although I have some nice paper profits, I'll continue to let them ride through these short-term bounces.   But if I was looking to buy today it would only be if my time frame was a lot longer than 12 months.

Answer 2

No contract will guarantee money.  There is always an Early Termination clause in a drilling contract.  They're only guaranteed for 90 days pay or the term of the contract.  Whichever is shorter.  The best way to gauge drilling is to watch rig counts.  And to follow dayrates.