ENSCO PLC (ESV), Noble Energy, Inc. (NBL): As Brent Stays Over $100, the Deepwater Drillers Remain Attractive

Speculative pure play

While the other stocks also focus on offshore jackups that drill in shallow waters, Pacific Drilling is the only one focused completely on drilling in deep waters. The company has four ultra-deepwater drillships under contract with four drillships under construction at Samsung Heavy Industries.

Revenues are estimated to hit $757 million in 2013 with a surge in 2014 to nearly $1.2 billion. Earnings will surge next year, but at only $0.78 the stock remains pricey compared to the sector. Investors will have to bet that operating efficiency improves dramatically in 2015 to make this stock attractive compared to the sector at these levels.

Bottom line

The deepwater drilling sector remains an attractive place to invest with the market soaring to record highs and these stocks trading at sub market earnings ratios. Investors have a slew of stocks to invest in based on risk preference and desire for dividends. The demand environment will stay strong with Brent oil trading above $100 even as global growth remains subdued.

The aggressive investor should invest in Atwood Oceanics for the growth of new rigs while conservative investors can invest in Ensco for the 3.3% dividend. For now, Pacific Drilling still needs to prove that it can generate strong profits while Noble Energy, Inc. (NYSE:NBL) needs to ensure it can ratchet up earnings that significantly by next year.

Mark Holder and Stone Fox Capital Advisors, LLC have a position in Atwood Oceanics. The Motley Fool recommends Atwood Oceanics. The Motley Fool owns shares of Atwood Oceanics.

The article As Brent Stays Over $100, the Deepwater Drillers Remain Attractive originally appeared on Fool.com.

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