Fire in the Hole: Energy Stocks That May Win in Wartime

Editor's Note: This column was originally published March 4.

As war with Iraq looks increasingly inevitable, oil prices have skyrocketed along with fears of supply disruption. In addition, the possibility that Saddam Hussein may try to sabotage Iraq's production facilities and target other countries' wells in retaliation for a U.S.-led attack have investors on edge.

But another angle to the Iraqi war scenario hasn't received a lot of attention: companies that could benefit from the need to intervene during and after a war to save, restart and stimulate crude production.

A number of companies stand to gain from renewed oil production in a post-Saddam Iraq, but a small group could benefit from intervention work during a war. Here's a look at some possibilities.

On Fire

The most immediate risk at the onset of conflict is the threat to torch Iraqi oil fields and likely attempts to ignite other production facilities. The risk of fires is significant in many pressure-packed wells. Although military personnel will need to secure areas before any civilian work is done, two companies would be ready to step in.

The world's leading emergency well-control company is Wild Well Control, a division of Superior Energy (SPN - commentary - Cramer's Take) that provides firefighting, well control and engineering services to oil and gas operators. Based in Houston, the company has extensive experience in the Middle East and has handled more than 1,500 well-control events in the past 25 years. Its wide range of services would complement its first-mover advantage in the region.

But to invest in Wild Well, you have to buy Superior Energy, a specialized energy services company that provides well intervention, marine services and tool rentals to oil and gas producers in the Gulf of Mexico. Superior may find additional benefits from remediation programs around Iraq, but it offers more exposure to the Western Hemisphere than to the Middle East.

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Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to Chris Edmonds.