Out Fox The $treet

Ocean Rig priced a perplexing secondary offering below the market price and substantially below book value. The apparent negative secondary has the positive outcome of reducing the ownership position of DryShips. The stock offers a compelling value at or below the offering price. The news of the day on Ocean Rig (NASDAQ: ORIG ) continues to highlight the risks of owning a stock with a weak owner. Prior to the news of the last few weeks, DryShips (NASDAQ: DRYS ) was listed as owning 59.2% of the outstanding shares. Prior to the recent moves, the position in Ocean Rig was worth more than the valuation the market gave DryShips showing the concern or its financial position. Read the full article on Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Summary Seadrill reports Q3'14 earnings. Stock is a strong buy on the irrational selloff. The original investment thesis expected solid results from Seadrill, but it did not anticipate the irrational level of selling to continue.          Read the full article at Seeking Alpha.  Disclosure: Long SDRL. Please review the disclaimer page for more details. 

For the first quarter, Transocean Ltd ( NYSE: RIG     ) generated earnings that smashed analyst estimates. The offshore driller, which has struggled since the Macondo accident and is plagued with old rigs, put together one of the best quarters in years. For offshore drillers, two key metrics dictate the level of profits: revenue efficiency and fleet utilization. In the case of Transocean, revenue efficiency hit 95.7% to reach the highest level since 2008. Fleet utilization is still struggling at 78%, but the level is high enough to produce huge profits. Read full article here . Disclosure: No positions mentioned. Please read this disclaimer page for more details.

Energy XXI Ltd ( NASDAQ: EXXI     ) provides a prime example of how the market doesn't like a company in transition or involved in a high-premium merger. Even with the backdrop of a strong market for energy exploration and production stocks, Energy XXI trades at multi-year lows. The upcoming merger with EPL Oil & Gas ( NYSE: EPL     ) provides the opportunity to exploit several large offshore fields while taking advantage of the seismic capabilities of that company. Read full article here . Disclosure: No positions mentioned. Please read this disclaimer page for more details.

After warnings from a number of sources highlighted the current pause in the offshore drilling sector, Noble Corp. ( NYSE: NE     ) reported solid first-quarter earnings that smashed estimates. The stock wasn't so upbeat, however, trading slightly down. The offshore driller continues to transition the fleet to a more modern one with high specification ultra-deepwater drillships and high-specification jackups. Also, Noble is in the midst of spinning off the old standard specification rigs into a new firm called Paragon Offshore via an IPO later this year. Read the full article here . Disclosure: No position mentioned. Please review the disclaimer page for more details. 

In a previous article , I explored the bifurcation in the deepwater drilling sector with a focus on the legacy stocks having older rigs not suited for modern exploration demand. This article will focus on the group of modern rig operators not facing the issue of rigs over 20 years old. Analysts are negative on the whole sector, though the modern drillers – Seadrill Limited ( NYSE: SDRL     ) , Ocean Rig UDW ( NASDAQ: ORIG     ) , and Pacific Drilling SA ( NYSE: PACD     ) – are in the attractive position of having modern drillships replacing older rigs operated by the legacy drillers. Read the full article here . Disclosure: Long SDRL. Please review the disclaimer page for more details. 

Over the last several months, several analysts have come out with dire warnings of a further plunge in shares of deepwater drillers. The market, which had already soured on the sector from several warnings of a pause in demand for offshore drilling in the deepest areas, is questioning the timing of the analyst calls. The cyclical offshore-drilling market faces an interesting dynamic of customers rethinking capital projects while oil and natural gas prices sit near recent highs. On top of that dynamic, a bifurcation is occurring in the market where the newest high-specification rigs remain in solid demand while the oldest rigs face idle time and the potential for being cold-stacked or dismantled. Read the full article here . Disclosure: Long SDRL. Please review the disclaimer page for more details. 

The debate over the current slowdown in the deepwater market covers a wide range of opinion regarding the duration and impact. Regardless of an investor's ultimate opinion, the offshore drilling sector always faces cyclical troughs and peaks. The key is the ability of the driller to take advantage of weakness and thrive during the following rebound. In the case of Transocean ( NYSE: RIG     ), the company is the largest deepwater driller with 79 rigs in total and 46 of those listed as either deepwater, ultra-deepwater, or harsh environment. The deepwater specialist is now facing a bifurcated market that it is quickly finding itself on the wrong side of the contract ledger. On top of that, Carl Icahn is pressing the company for changes, but his actions can't fight industry momentum. Idled rigs in a weak market might is never a good thing, but will the stock continue to plunge? Read the full article here . Disclosure: No positions mentioned. Please review t...

While Seadrill ( NYSE: SDRL     ) confirmed that exploration and production firms had recently cut back on capital spending budgets for 2014 due to escalating costs, the company actually sees a very positive scenario on the future outlook. Other deepwater drillers have speculated that the pause to drilling growth is needed for crews and suppliers to catch up with demand in order to refresh the market. Seadrill actually predicts the pause is greater undersupply of rigs by 2016. Seadrill is a leading deepwater driller with a focus on aggressively building out new rigs for what it forecasts as a major undersupply in rigs by 2020. Ironically, fellow deepwater driller Transocean ( NYSE: RIG     ) expects a weak market yet recently ordered two ultra-deepwater drillships. Read the full article here. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

In the face of what is supposed to be a difficult offshore deepwater drilling market, Ocean Rig ( NASDAQ: ORIG     ) produced a very impressive quarter. The CEO downplayed any weak market conditions in the premium rig area, suggesting that upcoming contract announcements would provide a clear price point for premium units. The results bode well for a deepwater driller loaded with new, premium rigs that has seen its stock stagnate since originally going public and trading around this same $17 level. The news is promising for Pacific Drilling ( NYSE: PACD     ) that has an even more premium fleet, yet has a few rigs lacking contracts for 2014. It also questions some of the concerns originally brought up by Noble Corp ( NYSE: NE     ). Read the full article here. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The longtime promises of Pacific Drilling's   ( NYSE: PACD     ) ultra-deepwater drillships continue to get investors nowhere fast. The stock went public at the end of 2011 to quickly jump to the $10 level. Pacific Drilling has gone virtually nowhere over the last couple of years as it builds its fleet. Pacific Drilling is focused on providing global ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification drillships. The company took delivery of its first drilling ship at the end of 2010 and now operates five ships with three more under construction. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

In the middle of rehashing the same short-term weakness story in the deepwater drilling sector, Atwood Oceanics ( NYSE: ATW     ) actually admitted that the weakness in the market was only impacting the old rigs. The company, while being cautious the whole earnings conference call, actually admitted that the bifurcation in the market is an opportunity and not a threat. The call started with the general theme of the Noble Corp. ( NYSE: NE     ) report calling for a pause that would refresh the market. Atwood Oceanics discussed slowing demand, which would hamper old rigs that might be cold stacked eventually. Atwood Oceanics hasn't actually seen any slack in demand for the high-specification rigs it is building. The report generally backs the ongoing theme of SeaDrill ( NYSE: SDRL     ) that new deepwater rigs will continue to command strong prices through at least 2020. Read the full article here . Disclosure: Long ATW. Please revie...

With Noble Corporation ( NYSE: NE     ) reporting a pause in deepwater drilling demand and an influential analyst predicting plunging demand in the sector, it's a good time to review the long-term case in the sector. Last week, SeaDrill ( NYSE: SDRL     ) attended the SEB Nordic Seminar and reiterated a very bullish long-term case for offshore rigs. With the company's stock down over 20% in a few months, investors should consider the stock if one believes in the bull case. SeaDrill is a leader in the deepwater drilling segment focused on building out a high specification fleet and returning large amounts of capital to investors. The company's stock currently yields over 10%. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

After reporting earnings on Jan. 22, investors continue to sell off shares of Noble Corp  ( NYSE: NE     ) due to fears of a cyclical downturn in the previously robust offshore drilling market. The company is busy completing a newbuild program that will modernize the fleet while at the same time spinning off the older standard assets into Noble Spinco. The spinoff will help focus the company into two separate companies with different objectives to benefit shareholders, but the old assets might lose significant value in a cyclical downturn. The stock sold off on the news of an industry pause, but people appear to be missing the extreme valuation and the limited slowdown forecasted by management of Noble. In addition, the suggested pause probably has a different impact on companies with a young fleet of premium, high-specification rigs such as SeaDrill ( NYSE: SDRL     )  as opposed to companies with older fleets such as  Transocean ...

Whether directly or indirectly, the aggressive newbuild program at Seadrill ( SDRL ) could benefit the most from the potential opening up of Mexico to international oil service firms. While still too early to get overly excited, Merrill Lynch suggests the potential is for Mexico to add 50 onshore rigs and 20 floaters in the next two years to pull the struggling industry out of decline. Seadrill is a leading offshore deepwater drilling expert with a fleet of drillships, jack-up rigs and semi-submersible rigs operating in Northern Europe, U.S. Gulf of Mexico, Mexico, South America, West Africa, Middle East and Southeast Asia. The company owns positions in numerous other drilling oil services firms including 75.7% of Seadrill Partners ( SDLP ) that alone is worth nearly $1 billion. Read the full article on Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

While investors remain focused on surging domestic oil production, the market is missing that global oil prices remain high. With Brent trading over $100, the deepwater drillers provide attractive investment options with PE ratios below 10. Some of the leading drillers include Ensco (NYSE: ESV ) , Noble (NYSE: NE ) , and Atwood Oceanics (NYSE: ATW ) along with speculative Pacific Drilling (NYSE: PACD ) .  Other investors may prefer the high yielding SeaDrill Limited or more » Disclosure: Long ATW. Please review the disclaimer page for more details. 

Anybody following the offshore drilling market knows that CEO Fredrik Halvorsen of Seadrill Limited ( SDRL ) is an aggressive operator. Not only does the company pay substantial dividends unlike the competition, but it also continuously wheels and deals rigs, divisions, and subsidiaries. The company is a leading offshore deepwater drilling expert with a fleet of drillships, jack-up rigs, and semi-submersible rigs operating in Northern Europe, U.S. Gulf of Mexico, Mexico, South America, West Africa, Middle East, and Southeast Asia. The company owns positions in numerous other drilling oil services firms including 75.7% of Seadrill Partners ( SDLP ) that alone is worth nearly $1 billion. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

It used to be that growth stocks traded at 1x the earnings growth rate. A stock growing at 10% with earnings forecasted at $2 would trade at $20 and in some cases up to 2x that growth rate. In the current climate a stock such as Atwood Oceanics (NYSE: ATW ) can trade at virtually half the growth rate. The company is an under-the-radar global offshore deepwater drilling contractor engaged in more » Disclosure: Long ATW. Please review the disclaimer page for more details. 

As the deepwater drilling market rebounds strongly, it remains interesting that the once unquestioned leader continues to struggle. After all, the company even uses deepwater.com for their official website. Everybody knows that Transocean (RIG) has been hit hard since the Macondo accident back in April 2010. While that incident initially set the company back, the stock rebounded sharply at the end of 2010 and the start of 2011. Investors buying the stock though weren't paying attention to their aging fleet. The company engages in offshore contract drilling services for oil and gas wells worldwide with a primary focus on deepwater and harsh environment drilling. Read the full article at Seeking Alpha. Disclosure: Long ATW. Please review the disclaimer page for more details. 

On Monday, Seadrill (SDRL) highlighted on the Q2 earnings call that deepwater drilling remains a very hot sector with limited available rigs for the next couple of years. This was a theme highlighted at the beginning of the year as drilling in the Gulf of Mexico had picked back up. The company provides offshore drilling services to the oil and gas industry worldwide. Its services include drilling, completion, and maintenance of offshore wells; production drilling and well maintenance; and well services. The company owns a fleet of offshore rigs and has 18 new builds under construction. While the adjusted earnings slightly missed estimates, Seadrill continues to see huge demand for its rigs and tightness in the market for the next few years. The company has one of the youngest fleets in the industry and continues to benefit from an aggressive new build program. Read the full article at Seeking Alpha. Disclosure: Long ATW. Please review the disclaimer page for more details.