Deepwater Drillers Offer Deep Value

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With easier drilling sources reaching their maturity and tapping out, oil companies are forced to drill much deeper for new supplies. Enter the deepwater drillers. These are the companies that lease rigs to the big oil names that need to drill at the most extreme depths of the ocean, a very specific and expensive task. Fundamentally, the economic landscape of the major deepwater drillers looks solid, and these companies should benefit from the robust, long-term demand for oil.

Oil companies are forward-looking by nature. So while oil prices continue to display high levels of volatility, deepwater exploration companies are not deterred. For decades, worldwide oil consumption has risen by 1% to 2% a year, and this growth will not abate now that emerging economies are consuming more and more of the commodity. China, with four times the population of the U.S., only consumes one-third the volume of oil that the U.S. consumes on a daily basis. ...