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Energy News Beyond The Oil Spill
The oil spill in the Gulf of Mexico at a BP (NYSE:BP) well has dominated the news in the Energy sector over the last two months. This has obscured some other noteworthy news items in the sector that investors should be aware of.
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Land Rig Market
There has been speculation that the land rig market will benefit from the problems occurring offshore, as operators sensing higher costs and increased regulation of offshore drilling will shift exploration and development to onshore areas. There appears to be little evidence of this shift to date.
Patterson-UTI Energy (Nasdaq:PTEN) released its rig report for June 2010. The company reported an average of 163 drilling rigs operating during the month, and an average of 156 rigs operating in the quarter ending June 30, 2010. This was just barely higher than the average of 155 drilling rigs operating that the company reported for May 2010.
Helmerich and Payne (NYSE:HP) had 11 of its rigs taken by the Venezuelan government after the two parties could not resolve a payment dispute. The government will pay the company the book value of the rigs as compensation.
Offshore Consolidation
The offshore drilling market is consolidating, with two deals announced over the last month. Rowan (NYSE:RDC) announced the purchase of Skeie Drilling, a Norwegian driller that has three jack up rigs under construction. Two of the rigs will be delivered before the end of 2010, and the last one in June 2011.
Rowan will pay approximately $1.2 billion in total consideration for the company, which includes the assumption of $530 million in debt, an additional $420 million to complete the three rigs, and the value of stock and cash paid in the deal.
The three rigs are not yet under a contract, but the management of Skeie Drilling said that the company has several leads. These are N class rigs that are designed for drilling in harsh environments, in particular the North Sea, where the rigs may eventually find work.
Noble Corporation (NYSE:NE) announced that the company was purchasing Frontier Drilling for $2.16 billion. Frontier Drilling owns seven units, including two currently under construction. All the rigs are contracted (although one contract is only for 100 day), and another rig has a contract expiring in the third quarter of 2010.
The Bottom Line
The wake of news created by the BP oil spill is certainly important to investors, due to both the financial impact on the companies involved and environmental ramifications of the spill. However, the media frenzy has buried other news that is important as well. (Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why. See What Determines Oil Prices?)
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IN PICTURES: 5 Simple Ways To Invest In Real Estate
Land Rig Market
There has been speculation that the land rig market will benefit from the problems occurring offshore, as operators sensing higher costs and increased regulation of offshore drilling will shift exploration and development to onshore areas. There appears to be little evidence of this shift to date.
Patterson-UTI Energy (Nasdaq:PTEN) released its rig report for June 2010. The company reported an average of 163 drilling rigs operating during the month, and an average of 156 rigs operating in the quarter ending June 30, 2010. This was just barely higher than the average of 155 drilling rigs operating that the company reported for May 2010.
Helmerich and Payne (NYSE:HP) had 11 of its rigs taken by the Venezuelan government after the two parties could not resolve a payment dispute. The government will pay the company the book value of the rigs as compensation.
The offshore drilling market is consolidating, with two deals announced over the last month. Rowan (NYSE:RDC) announced the purchase of Skeie Drilling, a Norwegian driller that has three jack up rigs under construction. Two of the rigs will be delivered before the end of 2010, and the last one in June 2011.
Rowan will pay approximately $1.2 billion in total consideration for the company, which includes the assumption of $530 million in debt, an additional $420 million to complete the three rigs, and the value of stock and cash paid in the deal.
The three rigs are not yet under a contract, but the management of Skeie Drilling said that the company has several leads. These are N class rigs that are designed for drilling in harsh environments, in particular the North Sea, where the rigs may eventually find work.
Noble Corporation (NYSE:NE) announced that the company was purchasing Frontier Drilling for $2.16 billion. Frontier Drilling owns seven units, including two currently under construction. All the rigs are contracted (although one contract is only for 100 day), and another rig has a contract expiring in the third quarter of 2010.
The Bottom Line
The wake of news created by the BP oil spill is certainly important to investors, due to both the financial impact on the companies involved and environmental ramifications of the spill. However, the media frenzy has buried other news that is important as well. (Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why. See What Determines Oil Prices?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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