By Nico Gayle
The Obama administration recently stated that it would issue a “handful” of new deep-water drilling permits in the near future. When evaluating offshore drilling companies in the current regulatory environment, the issuance of permits is a very important factor to consider. Below is the permit status for a few drillers. For some undervalued oil and gas companies, see our article here on 6 trading at a discount.
Noble Energy (NBL): Noble Energy was the first company to receive a deep-water drilling permit following the end of the drilling moratorium. The permit, issued in February, allows for the continuation of drilling at the Santiago well 70 miles off the Louisiana coast. NBL has a market cap of $15.76B, and offers a dividend of $0.72 (0.80%).
BHP Billiton (BHP): On March 11, BHP was issued the second deep-water permit since the moratorium. It allows for the resumption of drilling at the Shenzi production well, 120 miles off the coast of Louisiana. With a market cap of $249B, BHP offers a $1.84 (2.10%) dividend.
British Petroleum (BP): BP is a partner in Noble Energy’s Santiago well, owning a 46.5% stake. However, it is hard to see them receiving a permit in the near future due to the lingering effects of the Macondo oil spill. BP has a market cap of $143.24B, and stopped paying a dividend after the oil spill. For some put selling ideas for BP, see our recent article here.
ENSCO (ESV): On February 18, U.S. District Judge Martin Feldman ruled that decisions must be made on five ENSCO permit applications by mid-March. However, the Obama administration is appealing the ruling. The administration has said that it may have to reject the applications if it is not given more time. An Ensco rig is also drilling Noble Energy’s Santiago well that received the first permit. As of now, ENSCO has a market cap of $7.90B, but this number will nearly double upon completion of its announced merger with Pride International. The stock pays a dividend of $1.40 (2.60%).
ATP Oil and Gas (ATPG): In the same ruling, Judge Feldman ruled that the Interior Department must also decide on 2 ATP permit applications by mid-March. These decisions could have a large effect on the stock price. ATP’s Titan rig is a golden standard of safety, and has been on the short list for approval to drill a new branch off of an existing well. However, it may be difficult for ATP to gain approval for higher-risk wells because of the firm’s small size. The company, which has been hit hard by the delays, has started looking to other countries for drilling opportunities, especially Israel. ATP is a small driller, with a market cap of only $924.67M and no dividend. For some put selling ideas for ATP, see our recent article here. And for our take on ATP’s valuation, see our article from last week here.
Hercules Offshore (HERO): Hercules has the largest shallow-water Gulf of Mexico fleet. Although shallow-water permits have been slowed by the BP Macondo spill, they have been issued more quickly than the deep-water permits, and are expected to speed up soon. Recently, HERO purchased 20 rigs from Seahawk Drilling for $105 million. Hercules has at least one pending permit application, which was submitted in December of 2010. As another small driller, HERO has a market cap of $674.93M, with no current dividend.
Seahawk Drilling (HAWKQ.PK): Seahawk, which drills exclusively in the Gulf of Mexico, filed for bankruptcy in February as a result of the slowdown in the issuance of drilling permits, among other factors. They sold nearly all of their assets to Hercules in order to effectively liquidate the company. Seahawk has a very small market cap of $77.73M, and no dividend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.