I remain very bullish on the Onshore Drillers on our Watch List, including Patterson-UTI (PTEN) that is in our Sweet 16 Growth Portfolio. Current share prices assume that rig activity will fall soon. I just do not see that happening.
The offshore drillers also look very attractive, especially Noble Corp. (NE).
This is from Raymond James this morning:
In our Stat of the Week on August 15, we underscored that oil drilling activity in North America is set to remain very robust barring the unlikely scenario of the futures curve falling, and staying below, the $70/Bbl level. In other words, if you're looking for reasons why activity might slow down appreciably, the price of oil is not it. Access to capital is also not a problem - most major producers are flush with cash, while smaller players can tap the equity markets (royalty trusts, etc.) and sign strategic partnerships. Government policy (e.g., the ongoing "permitorium" in the Gulf) is a more substantive risk. But, perhaps more than anything else, the industry - particularly in the U.S. - is running out of the most important resource of all: people. We have written several times before (most recently in 2008) about the "graying of the oil patch" - the stark reality that, as the current petroleum professionals approach retirement, their ranks are not being fully replenished with new hires. At a time when the U.S. is suffering from persistently high unemployment, demand for professionals in the oil and gas industry couldn't be better - and their supply is struggling to keep pace.