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By Matthew Carr

What a rough month for oil…

Oil was already on a slide – down 16 percent in two weeks. Then the International Energy Agency (IEA) announced it’s releasing 60 million barrels of oil from its Strategic Petroleum Reserve. On top of Federal Reserve Chairman Ben Bernanke stating that U.S. economic growth is slowing. The two pieces of news stepped up the shelling of crude prices.

West Texas instantly slid four percent. And the speculative benchmark Brent fell even further.

But that’s okay.

Because this is a tremendous window of opportunity for investors. Don’t run away from the oil sector – embrace it…

Despite High Oil Prices, Exploration and Production Increasing

In its most recent Global E&P Spending Survey, Barclays Capital reports that worldwide oil exploration and production (E&P) spending will top $500 billion in 2011. An historic high-water mark. And a 16 percent increase over last year.

Despite high oil prices, the world still needs the commodity.

The U.S. Energy Information Administration (EIA) estimates world oil consumption will top 88.4 million barrels per day this year – a 1.7-million-barrel-per-day increase over 2010. Of course, of that per day increase, China accounts for 700,000 barrels.

We all know economic expansion drives oil demand. China’s economy will grow another 9.6 percent this year. And its oil demand will increase another 550,000 barrels per day in 2012.

Chewing on all that information for a moment, we can already see that the IEA’s 60 million barrel release doesn’t even cover a day’s worth of oil. Especially when you factor in that the plan is to release two million barrels per day over a 30-day span.

Oilfield-Service Companies at a Bargain Price

So, armed with all of this, and crude’s retreat, it’s time to snag some oilfield-service companies at a bargain price. Let’s look at two companies:

  • Oceaneering International, Inc. (NYSE:OII)

Oceaneering International provides remote operating vehicles (ROVs) and subsea services for offshore oil and gas, specializing in deepwater plays. Revenue in its ROV, subsea products and inspection divisions all increased in the first quarter compared to 2010.

The good news is, the offshore rig count in the United States is double what it was a year ago. The Gulf of Mexico is slowly returning and deepwater drilling will continue to pick up.

But the real story is the dramatic shift in rigs drilling for oil compared to natural gas. The number of U.S. oilrigs is up 71 percent – from 574 to 984. Meanwhile, the gas rig total continues to decline. And instead of the lion’s share of rigs drilling for natural gas, the majority are now focused on oil.

As with anything, the higher the demand, the higher the price. So day rates for rigs actually now top what they were during the 2008 drilling boom.

  • Helmerich & Payne (NYSE:HP)

Helmerich & Payne’s fleet utilization is at 85 percent, averaging $25,640 per day. More importantly, it has a squadron of FlexRigs, which demand a higher day rate, and are required for working shale plays.

So, don’t run and hide from the pullback in prices right now in the oil sector. Take the opportunity to get in.

Disclosure: Investment U expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees and agents of Investment U (and affiliated companies) must wait 24 hours after an initial trade recommendation is published on online - or 72 hours after a direct mail publication is sent - before acting on that recommendation.

Source: With Oil Falling, Now's the Time to Strike