why you shouldn’t fear the current storm in the deepwater drilling sector
DESCRIPTION
It has been a rough year for deepwater drillers like Seadrill, Transocean and Ensco. However, the industry’s current storm won’t last forever.TRANSCRIPT
“In our view, the energy needs of the 21st century will be satisfied by a combination of growing
production from…deepwater frontiers, which had gone from effectively zero to about 9% of
worldwide oil production in 20 years.” – Clay Williams CEO of National Oilwell Varco
According to industry estimates, offshore deepwater production will reach 14-16 million
barrels of oil per day by 2030 or more than 15% of daily oil supply.
The reason for the growth is simple, that’s where the industry is finding the oil...
Source: Transocean Investor Presentation
Yet, despite the strong long-term outlook, the short term outlook is weaker. This has impacted the share
price of contract drillers.
That’s a lot of new rigs. For perspective, the rigs under construction by the top three builders
combined – Seadrill (20), Transocean (14) and Ensco (8) – are adding what amounts to be another
Diamond Offshore or Rowan to the industry.
While that’s a lot of supply in the near-term, longer term the market looks undersupplied with rigs.
Investor takeaway
Add it all up and the long-term fundamentals of the deepwater drilling market look robust.
Investor takeaway
This is why investors shouldn’t fear the current storm, but embrace it as a buying opportunity that might not
last much longer.