Wednesday, October 29, 2008

Amidst the turmoil, solid contracts

As I've written many times before, the oil drillers have been sold off heavily since the spring. Current and forward P/E ratios are very low, indicating little confidence in the strength of dayrates, and thus future earnings. Today's contract announcement from Transocean (common 5.9% of portfolio, calls 0.1%) is further evidence that such pessimism is unwarranted, however. I've written about similar contracts many times, so I don't want to belabor the point any further. But clearly I think the drillers' prospects are brighter than the current consensus (and stock prices) would indicate, especially in the deepwater part of the market.