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2 Offshore Rig Companies With a Lot to Like

Stocks in this article: ATW ESV SLB GE ENI KOS

Yes, I'm suggesting that a large predator like General Electric (GE), which is aggressively expanding into the energy business or even a huge energy services competitor like Schlumberger (SLB) with its trailing 12-month (TTM) operating cash flow of $7.07 billion and $97.44 billion market cap could take out ATW with relative ease.

It seems like every week now ATW has announced another juicy deal for its rigs. On June 5 it announced that one of its subsidiaries had been awarded a drilling services contract for the Atwood Beacon by Eni (ENI), the Italian energy exploration and production company.

The Atwood Beacon is currently working off Israel's shore under a contract expected to conclude by July. The two-year contract from ENI, which can be extended to a third year, adds approximately $128 million more to ATW's revenue backlog.

I'd like to propose a suitable "marriage" partner for ATW that's a money-making machine in its own right. Ensco (ESV), a top-ranked global provider of offshore drilling services to the petroleum industry would be an excellent match for ATW.

ESV is in the same business as ATW and just ordered an additional advanced-capability DP3 ultra-deepwater drillship based on the Samsung GF12000 hull design. The vessel, ENSCO DS-10, will be the eighth Samsung DP3 drillship in the Ensco fleet, further extending the benefits of Ensco's fleet standardization strategy.

TheStreet's Jim Cramer and Stephanie Link have favored ESV for its exceptional execution of its business strategy and its shareholder-friendly attitude, which includes a dividend currently yielding 3.3%.

In fact, today they told Action Alerts PLUS subscribers, "ESV announced that it contracted for the construction of its eighth UDW drillship for Samsung with a cost of $625 million and an option to add a second blowout preventer at $35 million. It will deliver the rig later this year."

They added, "Management cited continued market strength and we like its ESV's superior technology, global exposure and diverse customer base. It has a new $2 billion buyback program and trades at 9x forward estimates, which is below peers."

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