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Noble Corporation (NE), Transocean LTD (RIG)- Off-Shore Drilling Companies: Performance Review

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US oil production has been growing at an astonishing rate. US

Oil production increased 14% last year, reaching 8.9 million barrels per day, reverting the declining production of previous years. This oil production revolution has given offshore drilling companies a new and fundamental role in the oil and gas industry.

Noble Corporation (NYSE:NE)

Let’s see what was the performance of three big drilling companies in the past months: Diamond Offshore Drilling Inc (NYSE:DO), Noble Corporation (NYSE:NE) and Transocean LTD (NYSE:RIG).

Diamond Offshore Drilling Inc (NYSE:DO): no debt but revenue difficulties

Diamond Offshore Drilling Inc (NYSE:DO) is struggling to meet expectations. It has posted a 5% decline in its first quarter revenue in 2013 for a total of $729.7 million compared to the same quarter last year. These results come amid heavy investing in renewing its drill ships fleet which cost around $4.3 billion. This is a capital intensive sector and any mistake could produce major setbacks for the company but the general outlook is prosperous for Diamond Offshore Drilling Inc (NYSE:DO): its return on capital employed is outstanding at 11.6% compared to Noble Corporation (NYSE:NE) and Transocean LTD (NYSE:RIG)’s at around 5% for 2012. Another positive aspect for the company is it’s near zero debt, an almost impossible task in this sector: debt to market cap for Transocean LTD (NYSE:RIG) is 42% and for Noble 46%. The company is in perfect conditions to grow, investors be aware. The near zero debt is an excellent signal of a strong balance sheet, but the company will have to improve its revenue stream as it showed a decline in the first quarter of 2013.

Noble Corporation (NYSE:NE): strong financials

Noble Corporation (NYSE:NE) is another offshore drilling company with a global footprint and has one of the biggest fleets. Given this global presence, the company’s revenue is geographically diversified which lessens some risks. Noble Corporation (NYSE:NE)’s strategy for 2015 is to increase its deepwater revenue in line with the current industry trends. The company posted $167.7 million in net income for the first quarter of 2013, a 48% increase compared to the first quarter last year. It has also shown improvement in fleet utilization from 83% to 86% in the same quarter comparison. The company is also developing a fleet modernization scheme that could enable it to charge higher prices for its services. Scale is important in this industry, and Noble Corporation (NYSE:NE) has the right attributes to take advantage of this as it has a large and geographically diversified fleet. Moreover, the company posted solid first quarter results which make it a safe bet compared to peers and a good entrance option for the offshore drilling frenzy.

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