Energy Names Have Stored Power

In addition, Nabors has increasing exposure to international markets, with an opportunity to move three dozen to four dozen rigs overseas in the coming year. That is especially true in Saudi Arabia, where Nabors continues to receive requests for rigs as SaudiAramco looks to accelerate drilling to offset increasing production declines. The Saudis are running nearly 100 rigs, almost double from a year ago, and continue to request more. Moreover, unlike rig contracts in the U.S., which are typically well-to-well, Saudi contracts typically run for a minimum three-year term and command day rates 30% to 50% above current domestic rates.

Offshore drillers also will benefit from increased activity. Jack-up rigs, which operate in shallower water such as the Gulf of Mexico shelf and parts of the North Sea, have seen day rates increase dramatically as nearly all rigs are working. That benefits companies like Rowan (RDC) and Ensco (ESV). One company with significant leverage as demand continues to increase is Todco (THE), which still has a pool of jack-ups that can take on new work. In addition, diversified rig companies like GlobalSantaFe (GSF) that have a fleet of rigs that work in various water depths benefit from both an increase in shallow and deepwater prospects.

Technology Focus

As the quest to find new oil and natural gas moves to deeper horizons, the application of new drilling technology is in focus. Clearly, companies like Halliburton (HAL), and Schlumberger (SLB) lead the pack here, although some smaller players are worth mention.

In deepwater exploration and production, the need for production and connection equipment on the sea floor, known as subsea technology, is becoming much more important. CooperCameron (CAM) and FMC Technologies (FTI) are the leaders here and continue to battle over lucrative contracts from the Gulf of Mexico to West Africa. FMC Technology's focus on packaging both hardware and technical expertise make this niche player an interesting play.

Two other names to watch on the technology front include Weatherford (WFT) for its significant focus on new drilling and production technologies, and Hydril (HYDL), with its focus on premium connections and pressure-control equipment. Both benefit from deeper, more challenging drilling applications.

While moderation in energy prices may cause some pause in the energy-stock rally, the need to drill to replace and expand production should keep the energy equity cycle intact. As a result, the second half of 2005 should provide plenty of powerful opportunities for energy investors.

TSC's Second-Half Preview Trends to watch over the next six months
	Why the Bears Are Smiling Picking Tech's Winners Expect the Greenback to Stay Strong Energy Names Have Stored Power For Handsets, It's Motorola's Year Satellite Radio Keeps Growing		Hotel Industry Stays the Course Banks Shoulder a Heavy Load No Love for Big Pharma Ritholtz: Watch the Macro Movers Hospitals Recover Second Half Biotech: Healing the Wounded

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