Definition of "Sweet Spot" - re: when to buy the Drillers
<<Worldwide offshore rig utilization reached
approximately 78 percent at the end of the first quarter, the highest level in
over a year. In conjunction with the higher activity level, day rates for
these rigs are beginning to see upward momentum, in particular Jackups with
250+ feet of water drilling capability. In addition, the non-North American
rig count recently increased, the first time in over a year, which suggests
the industry has reached its trough>>
Buy them exactly when the "trough" accelerates around the corner and turns into "unbridled momenteum" - as in "NOW" ~
To not take profits on E&P's (other than "story stocks" or laggards like PXD BSNX, or small caps) is to bet on historically high Commodity prices - Oil is a decent bet, but we heard this same NG story last year and blew off big time... Drillers win either way; as the E&P's are spending the same money on drilling; regardless if it's $2.50, or $3.50 Gas, or $19, or $29 Oil.
Only something catastrophic such as sub $2 gas, or sub $19 Crude will cause them to pull in the reigns imho; they need the cash flow and are caught in a depleting production trap - they must drill, drill and drill more in this environment; due to both financial & production replacement pressures. The drillers are in a win-win scenario here (they will drill more, given the E&P cap ex spending upside & the more they drill, the more they make; the E&P's are in a win-lose scenario...they win by drilling,increasing production; but if commodity prices fall they do not necessarilly make more money.
Just my humble opine ~ as usual...
This shows that the drillers "allways" are the "Mambo Kings" on initial sector rotation & cycle moves:
siliconinvestor.com
note: the outperformance would even be greater - if you cut off the turndown of the drillers in March.
Here is the nearterm divergence of the E&P's directly into a declince of the drillers here: This sets up the no-brainer "flip-flop - re rotation" play back to drillers/service imho:
siliconinvestor.com
"Q" - look at the end of the above linked chart; can you see the trend "flip-flopping" ?
HELLO PEOPLE !!!
Bank on it - it's a $lidacious no-brainer, money in the bank play (VBG). I should be getting paid for this (VBG).
DRILLLLLLLLLLLLERRRRRRRRRRRRRZZZZZZZZZZZZZZZZZZZZ $!$!$!$! |
