The demand for oil continues to grow. New discoveries, such as Petrobras’ Tupi field, are offshore and in deep water. Spending by oil companies on exploration and production is increasing. I Fast Tracked several oil and gas drillers. Transocean (RIG) and Noble (NE) passed my screen.
Fast Track results: Transocean failed 3 categories, and Noble failed 2 categories.
Key points:
- Transocean is the world’s largest offshore drilling contractor with 138 rigs, as well as being the leader in deep water drilling. Noble has 62 mobile offshore drilling units.
- Transocean and Noble are benefitting from strong backlogs, high rig utilization rates, and high day rates.
- Both companies are generating a lot of cash. Noble recently declared a special dividend of $0.75 a share.
- Transocean is highly leveraged with long-term debt as a percentage of total capital of 46.9%. I prefer Noble’s 13.1%.
- Earnings at both companies have equaled or beat Street consensus estimates in each of the last 4 quarters.
- Both stocks passed Fast Track’s valuation measures.
Transocean and Noble are potential buy ideas worthwhile thoroughly researching.
The Company Stock Risk Profile Fast Track is a research tool for quickly and easily screening stocks for potential ideas. Fast Track is comprised of 10 key categories incorporating fundamentals, valuation and how management and the Street feel about the stock. I like to see a stock fail no more than 3 categories before putting the stock through the complete 50-category Company Stock Risk Profile research process. Most important, whatever screening tool you choose to use, always thoroughly research the stocks that pass your screen before buying.
