Are Oil Stocks Already Played Out This Year?

Includes: ANDV, RIG, VLO, WNR
by: Faisal Laljee

Transocean (NYSE:RIG) is down 16% over 9 consecutive days of red. $97 is a key level of support and I am watching that carefully. Fundamentally, there is no reason for the company to go down.

Toby Shute of the said it best:

For the first time in the company's history, the overall fleet earned average dayrates north of $200,000. The 57% rise in rates, coupled with higher capacity utilization, drove contract drilling revenues up 64% over the prior year. Field operating income, which the company defines as sales minus operating and maintenance expense, hurdled 165% higher.

RIG is trading at a PEG ratio of 0.33, with triple digit earnings growth. Oil drilling is a good business, with high demand. But I wonder if all oil stocks have been played out for the year. I had warned readers to take profits in oil refiners last month, and since then Valero (NYSE:VLO) is down over 19%, Tesoro (TSO) is down over 18% and Western Refining (NYSE:WNR) is down over 15%.

Perhaps it is time to sell all oil related concerns? I thought the drillers would still work, but the recent declines are worrisome, although the broader market decline could be at fault. I recommend caution here.

RIG 1-yr chart: