Out Fox The $treet

After decades as an onshore and shallow water drilling specialist, Rowan Companies plc ( NYSE: RDC     ) is quickly shifting toward a mix of deepwater drillships. The company has four ultra-deepwater (UDW) drillships either recently starting operations or under construction. With the recent announcement of a contract for the last of the four drillships, the driller now has secured contracts for all of the UDW ships through mid-2017. The recent contract signed with Freeport-McMoRan Copper & Gold ( NYSE: FCX     ) has mostly positive indications for Rowan, which is good as the company began the year with a substantial amount of rigs rolling off contract. Also noteworthy, Noble Corp. ( NYSE: NE     ) didn't obtain this contract after securing a couple of deals for new drillships with Freeport-McMoRan starting operations soon. Read the full article here . Disclosure: No positions mentioned. Please read the disclaimer page...

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.

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 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 ...

As the Mexican government moves to reform the slumping energy industry, a whole slew of firms in the US stand to benefit. According to a Merrill Lynch report  , analysts estimate that Mexico spent about $8 billion on drilling and completion (D&C) services in 2012 and expect that number to jump another $2.5 billion in the next two years. Merrill Lynch lists a slew of stocks that will benefit from the hydrocarbon surge in Mexico. The firms include the typical large oil service and equipment providers, as well as offshore drilling specialists. Remember that a prime reason for the decline in oil output from Mexico has been a lack of expertise in drilling complicated offshore wells. While this might be a scenario where a rising ship raises all boats, a few stocks stand out to benefit the most. Read the full article here . Disclosure: Long WFT. Please review the disclaimer page for more details. 

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. 

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.

Raise your hand if you realized that by early 2012 there will be more deepwater rigs in the Gulf of Mexico than when the BP spill occurred. According to ODS-Petrodata, 40 deepwater rigs will be in the Gulf compared to 37 before the spill. As an investor and especially one that has invested in the sector, this news caught my attention as something the general investing public doesn't understand yet. So what stocks will be able to take advantage of this trend in 2012? First, companies that focus on drilling deepwater wells in the Gulf could benefit the most with the rising demand and possibly less competition as many rigs fled the area. Second, any companies in the deepwater segment should benefit with rising sector demand and higher global utilization lifting all day rates regardless of location. Read the full article at Seeking Alpha. Disclosure: Long ATW. Please review the disclaimer page for more details.

Transocean (RIG) used to be regarded as the top deepwater driller in the world. Its stock was considered a must-wn large cap in the energy sector. All that changed for the worse with the dramatic blowout of the Macondo well in 2010. Unfortunately, what seemed like an isolated event was just the beginning of a downward spiral for shareholders. Since then RIG continues to have problems meeting analyst estimates. On top of that, RIG just announced a shocking share issuance of up to 30M shares that pushed the stock down to 7 year lows. Yes, lows greater than from the financial crisis of 2008 and lows greater than 2010 lows after the explosion. Both those lows were eclipsed. How can Brent oil exceed $110 and a former premier driller be making a run at new lows? Other drillers such as Noble Drilling (NE), Atwood Oceanics (ATW), and SeaDrill (SDRL) are all currently attempting to claw their way to 3 year highs. Read the full article at Seeking Alpha. Disclosure: Long ATW. Please rev...