JBL: Drilling for Dollars

The consensus estimate is for Global Santa Fe's EPS to climb to $7.47 next year, which would be an increase of 45% from this year's forecasted numbers of $4.04. Based on 2007 estimates, Global Santa Fe is trading with a P/E multiple just over 7. The projected five-year growth rate is also 45%, which means this stock is a steal. (Global Santa Fe is slated to report second-quarter results on Aug. 2; consensus estimates are for EPS of 87 cents on revenue of $766.66 million.)

This is not just a Global Santa Fe story. Ensco and Transocean (RIG Quote) are also sitting in the driver's seat.

Ensco has seen day rates increase to over $103,000 this year, from $60,000 a year ago. It also announced a large move from the Gulf of Mexico, with a rig getting a day rate of over $200,000 for up to 24 months from a concern in Tunisia.

Excluding rigs in yards for inspection, upgrades and contract preparation, Ensco reported a 99% utilization rate for its jack-up rig.

Ensco has a P/E under 10 based on 2006 estimates; analysts forecast earnings growth of almost 37% for next year. This is another gift. (Ensco is scheduled to report on July 25; estimates are for earnings of $1.22 and revenue of $454.12 million.)

Transocean, which specializes in deep-ocean drilling, is up 15% since I first profiled it on Dec. 3; the stock is still a buy. Recently, Transocean announced a rig that had received a day rate of $184,500 in 2004 is set to receive over $520,000 a day from British Petroleum (BP Quote) to stay in the Gulf of Mexico.

I believe that with so many jack-up rigs leaving the Gulf of Mexico for better rates elsewhere, natural gas prices will increase. Oil is a global commodity; natural gas is not. Oil will not show a significant increase, because the drilling is not being lost globally, but is being reallocated.