Monday, June 9, 2008

Drillers surge again

My portfolio holdings are mixed today, but the oil drillers are ripping higher. This is especially true of Ensco (7.1% of portfolio), which is up 6% as I type. Even after the recent advance, the company has a P/E ratio of 11, and a forward ratio of 9. So it does not seem overvalued, and I'll continue to hold it. With crude around $136 per barrel, and pundits forecasting $150-200 by next year, drilling plans should be robust for the next couple of years at least. There is a danger that high prices may derail economic growth and therefore weaken demand for petroleum products, but even in that case, the incentive to drill will probably be fairly strong.