Rowan Companies PLC (NYSE:RDC) focuses both on high-end jack-ups and ultra-deep-water drilling projects. The fleet composition consists of 30 jack-up rigs in strategic locations including Mexico, the U.S., and the North Sea, also known as the Golden Triangle. Rowan Companies PLC (NYSE:RDC) has been operating four high-specification drill ships in the ultra-deep water segment, the most rapidly growing segment of the off-shore drilling sector. As a result, the company has been able to charge higher rates than most of its competitors.
Rowan Companies PLC (NYSE:RDC) was able to grow its revenue to $1.39 billion in 2012 from $939 million a year before. EPS for Rowan Companies PLC (NYSE:RDC) is expected to be around 16% over the next five years, and the current P/E ratio is 19. However, forward P/E is expected to come down to 9.2.
The biggest advantages of Transocean LTD (NYSE:RIG) over its competitors are its 50 years of experience and its leading position in off-shore drilling services. What distinguishes Transocean LTD (NYSE:RIG)’s business strategy from its peers is its well-diversified and extensive fleet size. Transocean’s revenue efficiency improved from 91% to 93% in 2012, and the company expects to increase capacity utilization up to 100% by 2017. Unlike Seadrill, the business structure is more inclined toward acquisition and divestitures.
Revenue growth has been slow for Transocean. However, the massive size of its operations gives it a larger footprint in the market. At the moment, Transocean LTD (NYSE:RIG) is trading at a lower P/E (17.4) compared to its other two competitors. EPS growth estimates for the next five years are around 27%, and current PEG ratio stands at 0.64. Looking at the valuation metrics, Transocean LTD (NYSE:RIG) is the cheapest stock in the bunch.
Conclusion
Seadrill, Rowan Companies PLC (NYSE:RDC), and Transocean emerge at the top of different stock categories. Seadrill Ltd (NYSE:SDRL) can be classified as a high-growth-high-dividend stock. Rowan does not pay dividends, but its recent decision to start a young, ultra-deep-water drilling fleet makes it a superior growth stock. As for Transocean LTD (NYSE:RIG), it can be considered a high-dividend stock for its large market cap and high trading price. In my opinion, off-shore drilling companies present an excellent opportunity to reap healthy gains in the short-medium term.
The article Should You Invest in Off-Shore Drilling Companies? originally appeared on Fool.com and is written by Ishtiaq Ahmed.
Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill and Transocean. Ishtiaq is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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