Wednesday, October 13, 2010

Drilling Through The Seabed Is Fun And Profitable

The Administration has thankfully lifted its self-imposed moratorium on deepwater drilling in the Gulf of Mexico, opening the way for a return to normal for thousands of waterborne roustabouts.  Handwringing over the possibility of more catastrophic spills is overblown.  Memories in the offshore drilling industry are long, and the prospect of lives, time, and money lost to a disaster will make every firm involved more risk-conscious.  Tighter government regulation is inevitable and warranted.  Rig owners should welcome that oversight because meeting higher standards will make liability tougher to prove in future litigation. 

This is definitely bullish for the oil supermajors and their drillers and servicers.  Transocean, McDermott International, and Oceaneering International spring to mind as worth watching.  It probably won't hurt Tidewater either.  Big finds on land are growing scarcer, so prospects in the deep blue sea look more attractive.  The Arctic Circle and Antarctica beckon.  One can only guess at the riches under the ice caps.  More capacity means less upward pressure on diesel prices, until it all runs out and we have to make biodeisel from switchgrass.

Full disclosure:  Long TDW with covered calls and cash-covered short puts.  No positions in RIG, MDR, or OII.