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HistoricalPEGuy (62.13)

Oil Services a Hold?

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April 11, 2007 – Comments (2)

I was blown away today by Stifel Nicolaus analyst R. Thaddeus Vayda.  He put a HOLD on RIG, GSF and NE.  The followng quips are taken from an article by the Associated Press - I haven't actually paid to see his actual comments, so it could be taken out of context.  But let's have some fun and assume they are just comments.

Statement #1: While Transocean has already contracted $10.6 billion worth of work through 2008, the analyst feels this full schedule leaves "limited potential for upside revenue and earnings revisions."

HPEGuy's Comments:  This is classic 'Efficient Market Hypothesis' crapola.  So, the stock is perfectly priced today and the only way its going to go up is if RIG finds a way to beat market estimates?  Are you kidding?  When RIG actually doubles its earnings, just like its says it will, do you really believe the stock will stay flat? No way is the market going to let RIG keep a tiny multiple with the need for deep water drilling.  International drilling is up 11% this year and double digit growth is expected with even higher day rates.  Finally, if this guys says "HOLD" and lowers estimtates, does that now mean RIG has a better chance to beat estimates?

Statement #2: Meanwhile, GlobalSanteFe Corp., the world's second-largest offshore driller, and No. 3 offshore driller Noble Corp. are somewhat exposed to lower payment rates in the near term because both companies have not contracted about 40 percent of their rig time for 2008, according to Vayda.

HPEGuy's Comments: Ok, so RIG sucks because its locked down all of its contracts and NE and GSF sucks because it HASN'T locked down all of its contracts.  What?  Was that double talk?  I'm smelling something fishy here.  Sure, PEMEX is a little scary for Noble, but I think the Mexican government will do the right thing and help settle the debt.  Does this analyst really believe that GSF and NE will have trouble meeting 2008 earnings forecasts? 

Me thinks this is a pumping move to lower the stock in the short term - wow I actually said that out loud.

2 Comments – Post Your Own

#1) On April 12, 2007 at 10:36 AM, CycleFreak7 (< 20) wrote:

Excellent comments HPEGuy, thanks.

Oil, natural gas and basically all energy sources are going nowhere but up.

There was a front-page article in the WSJ about how the Cantarell oil field in MX is drying up much more rapidly than expected.  The world's major oil fields are currently (or soon will be) suffering the same fate.

Shallow and deep water off-shore drilling is the new frontier for discovering new sources of raw crude.

The prospects for the companies set to capitalize on this trend are very bright indeed.

I read analysts' comments, but I mostly don't believe and/or trust them.  They are self-serving.  Many times, analysts' reports are excellent contrarian indicators.

 

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#2) On April 12, 2007 at 11:42 AM, Greshm (97.29) wrote:

Great write-up HPEGuy, thanks.

Greshm

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