NEW YORK (TheStreet) -- I was talking today with Stephanie Link, co-portfolio manager of Action Alerts PLUS, about two seemingly unrelated pieces of news in the oil patch that point to a similar but very long-term theme.
First, we have Noble Energy (NBL) buying fully 50% of 17 leases BP (BP) owns in the Gulf of Mexico. At the same time, Ensco (ESV) signed an agreement to contract one of its most sophisticated deep-water rigs to Total (TOT) for five years to work in the waters of off-shore Angola at a new high price for deep-water day rates
The common denominator here is deep-water drilling, but both of these deals run against the grain in different ways. For Noble, which is already deeply involved in shale oil production in the Wattenberg, it is fascinating for the company to make a new long-term commitment to the Gulf of Mexico instead of devoting more of its resources to furthering its reach in other U.S. shale plays.
Similarly, Total has been only slowly and carefully increasing its production profile. By paying this record sum for this deep-water drilling rig, it is committing strongly to off-shore production growth as opposed to onshore opportunities.
One thing that both Noble and Total seem to be saying is they believe the best long term opportunities don't appear to be on dry land.
But another thing that both companies are saying is they are willing to risk hundreds of millions of dollars on the belief that oil prices are going to stay high for a very long time in the future.
That is opposed to the futures markets themselves, where you can see five-year prices for crude oil almost $20 cheaper than they are selling for today. I think that projection of prices is absolutely wrong.
And, apparently, so do some very successful oil companies. I talk more about this with Stephanie in the video above.
At the time of publication the author had positions in NBL and BP. Action Alerts PLUS, of which Stephanie Link is co-manager, has a position in ESV.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.