http://www.prideinternational.com/rigfle鈥?/a>Is Pride International Inc. (PDE) a good long term buy in the oil drilling sector?
There are better opportunities in the oil drilling sector. The future of drilling is deepwater offshore drilling, and there are only a few companies that are focused on this. Transocean (symbol: RIG) is the largest and most technologically advanced. It just acquired GlobalSantaFe in 2007, and will be paying off the debt for a few years. The company has $33 billion in backlog, and it has the largest exposure to the deepwater market. Second, Diamond Offshore Drilling (symbol: DO) is the second largest deepwater company. As it is half-owned by Loews Corp (symbol: LTR), DO pays a substantial part of its cash flow to investors in the form of a special dividend, once a year, typically in February. However, DO has an older fleet and has been paying dividends rather than growing its fleet. Last, Atwood Oceanics Inc. (symbol: ATW) is a very small deepwater driller with only a dozen or so rigs. The company is relatively young and is viewed as a potential takeover target, as it has the coveted deepwater rigs that take a long time to build due to the current backlogs in rig orders. The valuations are much higher for ATW due to its stronger growth and takeover potential, which you should take into consideration. Of course, there are other companies in the offshore market that present some long-term potential. ESV sports very low valuations and could be a potential takeover target. HERO also sports low valuations, that will likely appreciate once debt from a recent acquisition is paid down. In fact, HERO is trading at 1.05 times book value, a great level of support for shares. NE also presents a reasonable risk/reward profile. PDE also sports low valuations, but its operating margin and balance sheet are weaker than the rest of the companies I have listed. PDE also is focused on land drilling which is the weakest drilling market. Basically, the deepwater drillers are less risky investments, as they do not depend on the jack-up market (shallow water rigs) and thus are not subject to the oversupply of jack-ups and potential weakness in dayrates of these rigs. However, there are some very cheap jack-up fleets that present some strong potential. I would look at these companies and avoid PDE and other land drilling fleets. You might want to wait to invest in any oil-related companies until oil prices go lower, as they get unfairly dragged down with the price of oil. When you do get into the market, go in slowly, and add as the prices go down. Just some thoughts, I hope they helped.
Best of luck,
Brendan Prewitt
President, New York Capital Investment Group LLC
Disclosure: My firm currently holds positions in the following: DO, ESV, HERO, NE and RIGIs Pride International Inc. (PDE) a good long term buy in the oil drilling sector?
99.9 Percent NO! This is one of the worst stocks to invest in if you are intrested in oil, as it might seem cheap because most oil stocks are hitting 100+ dollars this stock is potentially dangerous and the company itself has shown very little progress throughout the years. My guess it will stay in the 30s or back down to the 20s, dont expect much from this stock in both short and long term.
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