This was a very volatile week for the overall market, as measured by the S&P 500 index due mostly to the developing financial fiasco in the small European nation of Cyprus. The market rallied on Monday, corrected very sharply on Tuesday, then shot up strongly overnight between Tuesday and Wednesday, then remained flat on Wednesday, bounced around on Thursday, and had a weak rally on Friday. There were significant changes between the closing price of the index and the opening price of the market the next day nearly nightly this whole week. The price of crude oil was less volatile than the overall market index, although it also displayed some volatility of its own. We witnessed a sharp rally followed by an equally sharp correction in the first few days of the week and then saw another rally late in the week. As usual, this market action had vastly different effects on the stock prices of the seven offshore drilling companies that I track in this weekly series.
Seadrill (SDRL) opened on Monday, March 18 at $37.18. The stock closed at $36.61 in after hours trading on Friday, March 22. Seadrill shareholders thus saw the value of their holdings decrease by $0.57 per share or 1.53% over the past week. Seadrill opened at $37.04 on February 25, 2013. This gives the stock a trailing four-week loss of $0.43 per share or 1.16%. Seadrill gave a presentation at the Howard Weil 41st Energy Conference earlier this week. The PowerPoint document accompanying the presentation is available on the company's web page. It details the company's growth prospects going forward and provides an excellent analysis of the company's debt going forward that should provide some comfort to investors who are concerned about Seadrill's higher leverage level compared to its peers.
SDRL 5-Day Chart
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Source: Fidelity Investments
SDRL 4-Week Chart
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Source: Fidelity Investments
Ensco (ESV) opened at $58.51 on Monday, March 18. The stock closed at $58.52 in after hours trading on Friday, March 22. Shareholders thus saw the value of their holdings increase by $0.01 per share or 0.02% over the past week. The stock opened at $61.90 on February 25. Stockholders in the company thus saw their holdings decrease by $3.38 per share or 5.46% over the trailing four-week period.
ESV 5-Day Chart
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Source: Fidelity Investments
ESV 4-Week Chart
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Source: Fidelity Investments
Transocean (RIG) opened at $52.61 on Monday, March 18. The stock closed at $51.67 in after hours trading on Friday, March 22. Transocean's shareholders thus saw the value of their holdings decrease by $0.94 or 1.79% this week. The stock opened at $53.05 on February 25, 2013. This gives Transocean stock a trailing four-week loss of $1.38 or 2.60% over the trailing four-week period. Stock ratings site TheStreet.com reiterated its HOLD rating on Transocean stock, citing revenue and earnings per share growth as positives and poor stock performance and high debt as negatives. Transocean also rejected activist investor Carl Icahn's proposal to pay out a $4 per share special dividend. Considering the company's ongoing legal problems, this may be a good thing as the company should have sufficient cash on hand to defend itself and pay out any eventual settlement levied against it.
RIG 5-Day Chart
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Source: Fidelity Investments
RIG 4-Week Chart
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Source: Fidelity Investments
Diamond Offshore (DO) opened at $69.40 on Monday, March 18. The stock closed at $68.54 in after hours trading on Friday, March 22. Shareholders of Diamond Offshore thus saw the value of their holdings decrease by $0.86 per share or 1.24% over the week. The stock opened at $72.20 on Monday, February 25. The stock thus had a trailing four-week loss of $3.66 per share or 5.07%.
DO 5-Day Chart
(click to enlarge)
Source: Fidelity Investments
DO 4-Week Chart
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Source: Fidelity Investments
Atwood Oceanics (ATW) opened at $51.10 on Monday, March 18. The stock closed at $49.95 in after hours trading on Friday, March 22. This gives the stock a loss of $1.15 per share or 2.25% for the week. Atwood opened at $52.67 on February 25, 2013. Thus, shareholders in the company saw the value of their holdings decrease by $2.72 per share or 5.16% over the trailing four-week period. Atwood Oceanics also presented at the Howard Weil Energy Conference this week and provided the presentation on its web page. This presentation provides a number of reasons to like Atwood, including its strong financial position and growth prospects. I intend to write a more in-depth analysis on this promising offshore driller, but investors may want to have a look at the linked presentation in the interim.
ATW 5-Day Chart
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Source: Fidelity Investments
ATW 4-Week Chart
(click to enlarge)
Source: Fidelity Investments
Noble Corp (NE) opened the week at $37.24 on March 18, 2013. The stock closed at $36.63 in after hours trading on Friday, March 22. Thus, shareholders saw the value of their holdings decrease by $0.61 per share or 1.64% for the week. Noble opened at $37.38 on February 25, 2013. Thus, the stock had a trailing four week loss of $0.75 or 2.01%.
NE 5-Day Chart
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Source: Fidelity Investments
NE 4-Week Chart
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Source: Fidelity Investments
Pacific Drilling (PACD) opened the week at $9.62 on March 18, 2013. The stock closed at $9.87 in after hours trading on Friday, March 22. Thus, shareholders saw the value of their holdings increase by $0.25 per share or 2.60% for the week. Pacific Drilling opened at $9.64 on February 25, 2013. Thus, the stock had a trailing four week gain of $0.23 per share or 2.39%.
PACD 5-Day Chart
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Source: Fidelity Investments
PACD 4-Week Chart
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Source: Fidelity Investments
Five of these seven stocks saw their share prices decline over the past week and six of seven saw their share prices decline over the trailing four-week period. This is in spite of the fact that the offshore drilling industry is encountering near perfect conditions for companies in the industry right now. Overall, this creates an excellent situation for long term investors looking to either enter the industry or increase their positions in it. The best performing stock over the past week was Pacific Drilling, being one of two stocks that delivered positive returns over the week. The other company to deliver a positive return was Ensco, although its return was negligible. Pacific Drilling was the only company to deliver a positive return over the trailing four-week period and, as such, was the best performing stock over the period. Ensco was the worst performer, although Atwood and Diamond Offshore delivered similarly bad performances.
Disclosure: I am long SDRL, PACD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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