End this Gloom & Doom - this is a blatant buying opportunity !
Now we are in phase II; the quality companies like RIG, FGII, FLC VRC, MDCO are taking big hits... I understood the land drillers taking the hit first and foremost, leveraged high debt companies as well.Some profit taking was prudent. But now we're seeing the seismic and deep water drillers & service/equipment companies getting hit as well - way oversold !
The BIG difference between now and last Nov. - Dec. and March, is that many of these companies are in much better position to dramatically increase earnings due to acquisitions and/or ramping up capacity; or in the case or deep water drillers like FLC or RIG, they are that much closer to new (all ready contracted) deep rigs and drill ships coming on line. Also, these companies having proven to be profitable at these crude price levels - it's not as if these drillers are facing dramatic losses.If these stocks were worth their current prices 52 weeks ago at their prior lows, prior to the move upward; what are they worth today with new shipyards, new rigs, acquisitions of new rigs or even other companies, new pre-contracted deep rigs/drillships due to come on line...?
In comparision of earnings potential last year to the present - to be this close to having much greater earnings capacity coming online and to be selling at these levels can only be interpreted as a buying opportunity!
CDG a 7 times 99 reduced earnings estimates, FLC @ less than 8 times 99 EPS...are bargains. There are some discrepancies to take advantage of as well; some drillers have taken bigger hits than others...the points on MDCO and their transition to a much higher deepwater earnings penetration on the earlier post are well taken. In my opinion, CDG, MDCO, FLC, RIG, FGII, ESV, EVI, VRC, at these prices are solid buys with little logical downside... one could literally afford to wait for 18 - 36 months with some of these quality companies selling for 1/2 of prior highs and many for 1/3 of prior highs. A 2-3 bagger in 18 months is well worth the wait. Does anyone really think we will not see $16-$18 oil within that timeframe? The price -time factor / return ratio, is too good to pass up.
Even if one is not quite comfortable with current prices being the bottom - we have to be pretty damn close.It looks like the time to set price targets on the individual stocks you like and let them come to you... CDG $37 , FGII $29, FLC $24 RIG $45 sure would be hard to pass up for even the most bearish. A few small caps like TCMS, OMNI, BTJ and maybe VSEIF thrown in and I'm looking forward to a very merry Christmas.
Cliff's Drilling from current levels to $55 (where it was 6 damn weeks ago!) is starting to look like a 4th of July to Labor Day 50% play;! - if OPEC has some good news later this month. -gonna throw some healthy $ at this one, on margin to boot. How much downside to this one? - sub $30... I can still afford to hold untill eternity with that upside.
With OPEC and Riyadh pact members - have the current numbers just been trial balloons? - would be smart to do so; test the waters and if these announced cuts don't do it - then buckle down to reality later this month; which is what I expect they will do. We are %5 +/- from THE bottom IMHO. OPEC will do what they ''NOW" know they HAVE to do; as the initial trial balloons were shot down rather quickly... |
