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 Ocean Rig owns an attractive fleet of modern, preferred rigs. The company trades at a fraction of book value, despite remaining extremely profitable. The recent stock action provides an ideal entry point around $7. The offshore drilling market is setting up a unique scenario of a bifurcated rig market and correspondingly flipped stock valuations. E&P firms are increasingly demanding new rigs with modern capabilities giving an advantage to the newer fleets, yet the stock market isn't placing the modern fleet owners in the same positive light. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The July fleet status report for Transocean, Ltd ( NYSE: RIG     ) again provides an example of why the historical leader in the deepwater drilling sector is no longer the best investment going forward. The deepwater driller famously uses the website deepwater.com for its corporation, but it continues to struggle with old rigs in a market that demands the most modern capabilities. Read the full article here . Disclosure: Long SDRL. Please review the disclaimer page for more details. 

For a relatively young company forecasting fast growth, offshore drilling contractor Ocean Rig ( NASDAQ: ORIG     ) trades at a very attractive earnings multiple. The company continues to bump along with start-up issues from new drillships, but it appears poised to produce strong results going forward based on a solid contract book and an improving deepwater drilling market. Read the full article here . Disclosure: Long ATW. 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. 

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. 

On Friday, Pacific Drilling (PACD) announced a 5-year contract for the Pacific Sharav that amounts to over $1B in revenue. According to the presentation at Global Hunter Securities, the dayrate amounts to $555,000 for the term. The deal was hinted at during the Q112 earnings report so possibly the terms shouldn't be used to read too much into the current strength of the deepwater markets. Worth noting though is that the rig won't be delivered until the fourth quarter of 2013. With its best-in-class drillships and highly experienced team, Pacific Drilling is a fast growing company that is committed to becoming the industry's preferred ultra-deepwater drilling contractor. Pacific Drilling's fleet of seven ultra-deepwater drillships will represent one of the youngest and most technologically advanced fleets in the world. The company currently operates four recently delivered drillships, has two additional drillships under construction and one on order at Samsung. Read ...