A Lesson From Energy in Trickle-Down Economics: Halliburton Company (HAL), Transocean LTD (RIG)

The “black gold” rush has been rejuvenated lately, thanks in large part to unconventional drilling in North America and deepwater finds off the coast of nearly every continent on earth. Now that natural gas has found its way into the mix on a meaningful scale, exploration budgets have never been higher. Risk-averse investors who are still looking for energy exposure would be wise to follow the deluge of money set to pour on the companies wielding the picks and shovels.

Very little risk for the publicized reward
By publicized reward, I mean that upstream companies, at least those that are publicly traded, offer fairly detailed insight into their future spending plans. There are very few industries that have an advantage like this, where customers are outspoken regarding the amount of cash they are bringing to the store and that they plan on spending all of it.

Because of the inherent risk involved during the exploration and production phases — think Deepwater Horizon in 2010 orMcmoran Exploration Co (NYSE:MMR)‘s lack of success at its Davy Jones well — companies like Halliburton Company (NYSE:HAL) and ENSCO PLC (NYSE:ESV) are wise choices in my opinion. There are many reasons why both of these companies are part of my portfolio and why they, or their peers, should be a part of yours.

2,000 leagues under the sea
As traditional energy pockets dry up, new frontiers must be explored. One of the hottest frontiers right now lies thousands of feet below the ocean’s floor, underneath 7,500 or more feet of water. These ultra-deepwater ventures are costing exploration companies like Exxon Mobil Corporation (NYSE:XOM) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A) over $600,000 per day just for drilling companies like Ensco to operate.

Why do I like Ensco compared to some of its peers? Because it has the youngest ultra-deepwater fleet in the world and the second-youngest deepwater fleet behind Seadrill Ltd (NYSE:SDRL). Add up all of its rigs, including its toddler-aged fleet of premium jack-ups, and Ensco has the second-largest fleet with 74 rigs behind only Transocean LTD (NYSE:RIG)‘s 99.

I also feel compelled to mention the fact that it was just voted the top offshore driller in customer satisfaction by Energypoint Research for the third straight year. While this award might have been brushed off four years ago, customer satisfaction and safety have been a point of emphasis since BP’s Macondo well disaster, which has cost it nearly $40 billion in charges and commitments to date.