The Interior Department estimates @ 18bn barrells of oil lie beneath the current off-limit-to-drilling Pacific and Atlantic coasts. After smarting from the pain and shock of $4 per gallon gasoline prices, public opinion has shifted to support what was once considered an environmental taboo. Democrats realize this and therefore have no choice but to allow the 25 year moratorium on off-shore drilling to expire. David Obey, the Appropriations Committee Chairman, confirmed with reporters that language regarding this ban will be omitted from a spending bill before Congress recesses for the upcoming election. This move can be marked as a victory for Republicans and President Bush who campaigned vigorously to change this policy.
However, the spoils of victory belong to those companies involved in off-shore oil drilling as they stand to benefit the most. Most of these stocks trade well below their 52 week highs. When, and not if, any of them secures new contracts related to these previously banned coastal areas, analysts will need to upwardly revise their estimates for revenues, earnings, and valuations. This is a somewhat early call, but it gives investors an opportunity to also savor the taste of victory.
Offshore drillers to watch: RIG ESV DO PDE HERO NE RDC
