As the stock market inches higher, bargain hunting gets a little bit harder. But offshore drillers, along with related ETFs, are trading at bargain price-to-earnings ratios after investors dumped shares in what appeared to be guilt by association to the BP-Gulf oil fiasco.
Offshore drilling companies that lease oil rigs to energy companies are trading as low as 7-1011 times estimated 2007 earnings and 6-to-7 times 2008 returns, reports Andrew Bary for Barron’s. Wall Street has kept oil driller valuations low because of concerns associated with an increase in new rig operations set to come out.
However, oil bulls believe that the current boom in the oil industry may continue into the next decade as high oil and gas prices create greater demand for offshore production. Transocean (NYSE: RIG) CEO Bob Long recently stated that they are “comfortable that…oil prices down to $40 a barrel and maybe even down to $35 would have little or no impact on the deepwater market.”
SPDR S&P Oil & Gas Exploration & Production (NYSEArca: XOP)