If the current high price of crude oil reflects a fundamental change in the world-wide demand for oil, as many suggest (see Sunday Washington Post article), then prospects may be bright for oil services stocks. We have one oil services stock in our portfolio, Helmerich & Payne (HP). The stock is at $52.90 per share, up from the $33.72 we paid for it last June. HP is 6.8% of our portfolio. HP provides contract drilling services to oil and gas producers primarily in the United States, Argentina, Colombia, Ecuador, and Venezuela.
It might be wise to diversify and include deep water drilling company. Transocean Inc. (RIG) pops up in numerous screens and articles. Value Line describes Transocean as the world’s largest offshore drilling contractor, working in all the major offshore regions, including the Gulf of Mexico, the North Sea, the Middle East, and off the coasts of West Africa, the United Kingdom, Norway, Brazil, and Canada. It specializes in technically demanding deep-water/harsh-environment drilling projects.
Here is a stock selection guide for Transocean. Manifest Investing estimates a projected average return of 19.3%. Morningstar rates Transocean 5-stars (undervalued) and calculates fair vale as $176 (current price is $133). We should consider selling part of our position in HP and buying RIG.