Cenovus Energy Inc (USA) (CVE), Seadrill Ltd (SDRL): Why You Should Invest in These 3 Oil Companies

Per an Energy Information Administration report, it is expected that oil production in the current year will be around 89.89 million barrels per day (bbl/d), while the global consumption of oil will reach 90.03 million bbl/d. Furthermore, production will surge to 91.22 million bbl/d, to match the consumption of 91.40 million bbl/d in 2014.

Cenovus Energy Inc (USA) (NYSE:CVE)

Looking at the dynamics of production and the estimated consumption of oil, the companies producing oil and gas should benefit.  Lets take a look at three oil and gas companies that could really outperform the market.

New contracts

Seadrill Ltd (NYSE:SDRL) recently won new contracts for drilling and oil exploration. The company received a 3 year contract from Bluewater in April 2013 for ultra-deep water drilling at West Neptune in South Korea.  The site is under construction and is expected to be ready by the second quarter of 2014. With a per day rate of drilling at $570,000, the company will earn revenue of around $662 million, and the contract can be extended for 1 year.

Seadrill Ltd (NYSE:SDRL) also extended its contract with Vietsovpetro for two jack-up rigs in West-Ariel and West Prospero in Vietnam for eight months at a day rate of $162,000.  That’s a sizable sum and should go a long way to ensuring its profitability.

In the first quarter of 2013, Seadrill Ltd (NYSE:SDRL)’s net operating income was $552 million and revenue was $1.3 billion.  In fact, it was the finest quarter ever for the company in terms of net operating income. It showed year over year growth of around 21% in net operating income and 18% in revenue.

The company optimally maximized its floater utilization to 92%, from 86% in the same period last year. Moreover, its jack-ups also performed well, with increased utilization of 99%, a 7% sequential increase.

Oil-rich resource

Cenovus Energy Inc (USA) (NYSE:CVE) recently sold its oil assets in Shaunavon for $236 million to Surge Energy. These assets were producing 3,600 bbl/d for Cenovus Energy Inc (USA) (NYSE:CVE). The company is eyeing its future growth in Alberta oil sands. Oil production from Alberta and nearby regions is expected to be around 125,000 bbl/d by 2016, from 70,000 currently. Moreover, the company has another 4 oil producing projects in Christina Lake, Foster Lake, Weyburn, and Pelican Lake.

The company increased its oil production outlook from 235,000 bbl/d to around 280,000 bbl/d for the current fiscal year, due to increased oil production capacity at Foster Creek. Each phase of Foster Creek, namely, F, G, and H is expected to produce around 35,000 bbl/d, individually, which is an increase of 5,000 bbl/d from its earlier estimation. The company has also reduced its oil production time line for this region.

In addition to this, its project at Christina Lake is underway and is ahead of schedule. The strong performance of this region is seen as a positive indicator and Cenovus Energy Inc (USA) (NYSE:CVE) should benefit from these oil rich regions.  Looking at the projects undertaken by Cenovus Energy Inc (USA) (NYSE:CVE), and divestiture of underperforming assets, oil and gas production will surge in the upcoming years.

Brazilian giant

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) sold its stake in Nigerian oil assets for $5 billion, to focus on its higher-return activities in its domestic market, Brazil. The company adopted a strategy to invest $237 billion between 2013-2017.  As of now, It is the world’s largest investment plan by any company.

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is a state-owned Brazilian company and the government wants to achieve self-sufficiency in energy production. In doing so, the company is hoping to double its production.  Its Production target is around 5.2 million barrels per day.

Moreover, the company also plans to sell assets worth $9.9 billion in 2013. By selling assets, the company will finance its future oil exploration plans.

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) started its initial commercial production of oil from Cidade de Paraty in Lula Nordeste field, Brazil. This region has water depth of 2120 meters from the coast and has 15 wells to operate. The production capacity of this region is 150,000 bbl/d and 5 million metric cubes of gas per day.

Its initial production from this region is expected to remain at 13,000 bbl/d, but will reach 120,000 bbl/d in the second quarter of 2014. Looking at the promising production figures of this region, the company will tap the emerging market of Brazil, which will result in increased revenue of the company.


As a result of new contracts by Seadrill Ltd (NYSE:SDRL), its revenue will surge in the fiscal year 2013 and 2014. Also, the optimum utilization of assets should benefit the company.  Cenovus Energy Inc (USA) (NYSE:CVE)’s asset selling plan will pay-off and its production outlook from the Cedar Creek is also promising.  The 5 year investment plan of Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is ambitious and it may allow Brazil to take care of all its energy needs in house.  Take a look at these energy giants for yourself–you might like what you find.

Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro (NYSE:PBR) S.A. (ADR) and Seadrill. The Motley Fool owns shares of Seadrill. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Why You Should Invest in These 3 Oil Companies originally appeared on Fool.com is written by Madhu Dube.

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