Crude oil activity is in what I believe to be a "priceless recovery," whereby drilling activity is recovering in the key places of swing production, even though the price of Brent Crude stays rangebound in the $50s. There are many important indications that we've reached a bottom in oil and gas activity, and this is thanks to a few things: Cost deflation in capital expenditures such as drilling and completions, continual innovations which make drilling more economical, and a persistent decrease in operating costs.
A good deal of these cost reductions are permanent, if we are to believe the management of most of many upstream companies. I do believe those forecasts, and I generally believe that one can therefore waive the 'all clear' signal in various parts of the oil and gas industry. That's not to say there won't be any more major bankruptcies, or more stress in certain areas, but I do believe that enterprising investors should start wading in to the energy names which stand to benefit most.
This article recommends three of those names, each of which I believe will be among the greatest beneficiaries of this 'priceless recovery,' a recovery I believe we are experiencing now. Two of the three pay a substantial dividend, while the third, I believe, will re-instate its dividend before too long.
In particular, deepwater offshore drilling has seen its worst, and from here I believe investors will find conditions steadily improving. The bottom in offshore drilling activity was marked by the dramatic Chapter 11 bankruptcy of Seadrill Inc (SDRL) and the equally dramatic acquisition of Atwood Oceanics (ATW) by Ensco PLC (ESV). This will provide the offshore rig leasing industry the consolidation it desperately needs. For this reason, I would like to recommend Transocean
