Friday Dec 23, 2011
Take a look at the article on page B 7 of today's Dec 23 WSJ.
Oil Firms Face Services Hurdle
The upshot is that there will be demand for 90 MBPD world wide but the Energy Service Sector, as I said yesterday the pulse of the Energy Business is under staffed.
Over the last few weeks I moved my employer retirement plan into
FFGCX Fidelity Global Commodity
FSENX Fidelity Energy
FSEXS Fidelity Energy Services
INvesting in individual companies is always a risky proposition. But note this paragraph about Transocean
RIG in the article.
Apparently there are no more than five deepwater rigs not spoken for available this next year. Understand that RIG is the result of consolidation in the industry for offshore platforms. These structures are incredibly expensive and if you want one in a tight market, pay up, period.
Accounting Analysis RIG
Technical Analysis
RIG is trading for less than one half its 2010 high prior to the BP disaster
Selling in the lower two panels measured by Volume and Chakin Money Flow appears to be a the sort of peak associated with important lows.
RSI at top is has made repeated lows
Happily there is no sign of a turn to the upside, why happily, that means the price is stil low
Fundamental Analysis
What's it worth-the book value is $65 a share, the stock is $40, this is incredibly significant. These rigs simply cannot be quickly duplicated nor can the talents of the employees. RIG is the world's largest offshore operator.
Insiders have begun buying, this is perhaps the most important piece of the puzzle
At $40 per share the firm has $10.27 per share in cash
Cash Flow is improving, capital expenditures are necessarily high to maintain equipment in the harsh salt water environment
Checkout the company website for yourself
And now, big finish, the best part, we get paid for waiting, the dividend of $3.16 yields 7.9% at the current $40 price. Gross revenue and costs are consistent on the income statements, I would assume this will be a seller's market in the near future.
What is the worst thing that could happen, well other than another BP disaster..
This monthly chart takes us back to the post 9/11 crash low and dot.com bust leading to the 2003 low.RIG hit 20. It now trades at the 2008 and BP lows of 40.
My overall expectation is for a stock market high in early 2012. How does RIG play out in that scenario, that's the problem. RIG looks good for at least a bounce here. AS I write Friday Morning West Texas Intermed hit $100.
The most compelling part of the story is that insider buying has begun. The guys that run the company are the best judge of where their own money should be.
As always investigate before you buy anything, there is no assurance that RIG has hit its eventual low price yet.
Comments