Offshore Drillers that May Profit from End of Ban

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

Comments

[Paul Killinger:]

We'll see. It's going to be some time before anyone actually wins a lease to explore the OCS. And, lest we forget, we have an election coming up first. Its outcome will likely determine when (and even if?) we can access these vital energy reserves. Let's hope this doesn't prove to be a Pyrrhic victory.

2008 Sep 24 08:58 AM

[CT Programmer:]

You act like Republicans are the only ones that understand energy issues. This is really a stupid article passing partisan politics as financial news. Florida and California's politicians (Republican or Democrat) have been adamantly opposed to off-shore drilling. If this stuff ever really takes place, it won't be for a decade. paulk8756 is right in that stuff like this (even if approved) takes years. RIG has all of their drilling rigs contracted out past 2012. Off-shore drilling is a drop in the bucket, even for RIG. It's political pandering from both sides of the aisle. Oh, and by the way, the Interior Department were the ones involved in the whole sex and drugs scandal paid for by oil companies. Their figures are (to say the least) to be taken with a grain of salt. And virtually EVERY STOCK IN THE MARKET is trading beneath its 52-week high!!! Disclosure: I'm a Democrat and I'm long RIG.

2008 Sep 24 09:22 AM

[PeteK:]

Drilling our own oil will benefit everyone, not just oil companies. Politically wise too because we have been treated like beggars by those fanatics & tyrants who have oil to sell. At the same time, we need to save gas by driving less, buy smaller cars, and develope wind & solar energy also. That way, we'll be fine.

2008 Sep 24 09:23 AM

[Paul Killinger:]

CT,

Please don't misconstrue my remarks. As of now (Oct. 1), the states will have no say in what takes place ouside their waters, which end only three miles offshore.

It is thought the bulk of the estimated 18 billion barrels of recoverable oil in the OCS is pretty close in, which may not require the new "super rigs" to explore. And these are 30 year old estimates. Exploration and production technology has advanced dramatically since then.

However, when and if we find out how much energy actually lies off our shores is still open to question. As a Democrat, do you believe you could convince a Democratic Congress and President to reasonably allow exploration and production there? I'm not so sure.

Of course, if this were to happen there's no question RIG would be one of the biggest winners. We'll see.

2008 Sep 24 10:07 AM

[Paul Killinger:]

Let me say I also don't believe we can risk our economic future well being exclusively on electric transport. Or for that matter, on oil or natrural gas vehicles, either. If one looks at it objectively, we need to do ALL this, and generate ALL the additional electricity we can from wind, solar, biomass, geothermal and more nucelar reactors at the same time.

We've had it pretty good during our lives, and it is our children and theirs who will have to live with the decisions we make today. We owe it to them to provide them ALL the opportunities we had, which are
TOTALLY dependent on access to inexpensive energy

2008 Sep 24 10:28 AM

[Paul Killinger:]

This is my problem with the environmental community. It's either their way or the highway. Just because you believe deeply in something doesn't necessarily mean you're right.

But I know this. The Industrial Revolution itself was built on access to affordable (read "cheap") energy. Without it we won't have to worry about saving the planet. We won't even be able to save ourselves and our families.

(If you believe in UFO's, can you even begin to imagine the power they've learned to harness to visit here? If we desire to do the same some far off day, it will only be because we could afford to develop such amazing technologies. And we will need plentiful inexpensive energy if we're ever going to get there.)

2008 Sep 24 10:40 AM

[Paul Killinger:]

Allowing our government to "ration" the types or amounts of energy we have the ability to produce is nothing less than a sin against the future of all mankind, I believe.

2008 Sep 24 10:44 AM

[Paul Killinger:]

As regards the environmental safety of producing oil and gas off our OCS, consider this. There are several hundred production platforms off the coast of Louisiana, where I live. It is also universally considered to be one of the TEN BEST fishing spots in the world!

(Sorry, I can't seem to get off my soapbox today.)

2008 Sep 24 11:09 AM

[Robbit:]

Paulk8756 can you e-mail me at Robbit22 at gmail dot com?

would love to talk more about this! Thanks!

2008 Sep 24 11:21 AM

[Norman Lepo...:]

Good comments and good article.

2008 Sep 24 11:33 AM

[Emerald:]

The key to our future is 1.) investing in and inventing new energy technologies (solar, wind, electric, etc.), 2.) creating new jobs in these industries so we don't have to ship our hard earned dollars to foreign despots. Ever wonder why Bush calls the Saudi rulers his friends when they are the single largest entity funding madrassas that teach poor young boys to hate America? We can't criticize them because we need the oil. How many more Americans need to die in endless oil wars that are bankrupting us? Put the money to use at home investing and growing alternative energy. Onvert all buses and trucks to natural gas use and invest in clean burning coal technology.

2008 Sep 24 11:46 AM

[Jake2:]

"This is a somewhat early call, but it gives investors an opportunity to also savor the taste of victory." How many days since Bush declared victory in Iraq? 'Publicans just don't get it.

2008 Sep 24 12:40 PM

[Itsonlymoney:]

paulk8756,
If you are speaking for the next generation you might want to consider a longer time frame. I think we've had our wake up call and now need to get on with the business of non-carbon based sustainable alternative energy. The oil must be our bridge to a sustainable future otherwise we will not have the capital to make the change. Time and oil is wasting and history books are full of failed civilizations who could not adapt.

China, by the way, is a good example of what you get when environmental considerations are neglected. They exchanged their clean rivers and air for a cash horde that should have been spent on pollution control. These days it is unhealthy even to eat the fish from their waters. Of course the same can be said of shell fish in San Francisco Bay.

2008 Sep 24 01:38 PM

[Paul Killinger:]

Money,

I'm not trying to pick a fight. I'd like to see a magic energy bullet as much as the next guy. The technology's just not there yet. And dreaming we can get there by artificially making gasoline super expensive won't work either. We'll go broke first!

But we're making progress. The Congress is voting to extend alternative energy tax credits right now, although I understand they're leaving clean coal technology out, which is a major mistake. (That's yet another example of the problem with involving the politicians in the first place!)

And the real "bridge" to our energy future isn't oil at all, that's just a stopgap. It's what Boone Pickens is saying, wind to replace NG on our electric grid and NGV's through our kid's lifetimes. (The EPA says they're as clean as electric cars, incidentally.)

But if we don't get off our butts and do a bunch of nuclear reactors to expand our electric capacity, mass use of EV's will cause brownouts. In fact, we're headed toward brownouts without them.

2008 Sep 24 11:38 PM

[bassmaster17:]

Hippie liberal environmentalists, where's the global warming, I don't see it..We had two 90 degree days in Ohio this year!!! Watch out...develope clean coal tech with subsidies all these other wind solar etc. are pipedreams...this is the US, not a small condensed nation like Holland that can actually get away with this.

2008 Sep 27 11:30 PM

[captaincraz...:]

Bassmaster,

Bassmaster, I bet thinking hurts your brain. Really? Only two days of hot weather in shittown, Ohio (I live in Columbus) and you are an expert on atmospheric science and climate change? Wow. I bet in your spare time you could become a doctor by watching discovery health.

Humor me for a minute and hear me out though. Set aside the belief of whether global warming exists or does not. It is just plain dumb to analyze a problem by looking at an incredibly narrow and obscure fact such as the number of 90 degree days in Ohio, let alone the US. By that same stunning analysis, clinical trials where two patients out of a thousand who respond positively to a placebo must mean that the placebo (sugar) helped them overcome a disease. But, in defense of global warming, in July Iceland recorded the hottest temperature ever seen since 1870. The last record was set in 2004. So based on my conclusions from Iceland's two hottest days in over 130 years, global warming must be occurring. Bet you would argue with me because Ohio did not see a very hot summer. I'm tired of people who took a biology 101 class in college who try to dismiss a global climate analysis on whether or not they had to turn their a/c up or down last summer. If your doctor said you had the beginning of small pox because based on the single fact that you had one small red dot on your arm, you would switch doctors because your current doctor is an idiot. Let smart people do their jobs and listen to them because they are, in fact, probably smarter than you. Also, what is the worst thing that happens if we invest heavily in alternative fuels over the next few years? We end up with a country with lower pollution, new jobs, and energy independence?

I almost forgot about your little "we are a big country not Holland that can get away with this" We only have approximately 270 times the land size of Holland. That means more area for which the sun hits (Arizona and the southwest have vacant land and a very high concentration of solar radiation) more land to grow switchgrass (corn is inefficient at best for biofuels) and lets not forget an abundance of wind out west.

But you're right, a tiny little country like Holland can work towards energy independence. But big 'ol, cumbersome USA should just lumber around and do what we have been doing because "doing things so hard" so why even try? After all with our booming economy, i'm sure 5-10 dollar gasoline should not be a problem. It wasn't for Europe...oh wait, they had riots and people were killed. So why try?

I am tired of shitty, ignorant arguments like yours that enough (read: more than 1) people hear and latch on to because they want to believe they are smarter than they are. So instead of listening to people that have spent decades at University learning and their profession, they make a quick, irrational argument as to why they believe the opposite. After all, that will show those phd elitists who knows what about things. Just because someone graduates from Idaho University with a communications degree, does not make them any less thinky than a person with a phd from Standford. Good call.

So crack open a bottle of bud light Captain Smarty Pants because if you believe that, then you don't have to worry about killing any more brain cells.


On Sep 27 11:30 PM bassmaster17 wrote:

> Hippie liberal environmentalists, where's the global warming, I don't
> see it..We had two 90 degree days in Ohio this year!!! Watch out...develope
> clean coal tech with subsidies all these other wind solar etc. are
> pipedreams...this is the US, not a small condensed nation like Holland
> that can actually get away with this.

2008 Oct 08 12:09 PM

[OffshoreMan:]

Although many Drillings Companies have longterm contracts for their rigs, it is the Oil Company that has contracted the rigs that determines WHERE they drill. i.e. Shell, XOM, ADC etc tells the rig where to drill. Drilling off the Coast of FLA or CA is not that far off. China is already drilling 80 miles off the coast of FLA now. It's in international waters so there is nothing to stop them.

2008 Oct 10 08:50 PM