Offshore Drilling Investments

Keith Kohl

Written By Keith Kohl

Posted July 16, 2013

Back in February, offshore driller Transocean announced it had set a new world record for the deepest water depth by an offshore rig.

Its Dhirubhai Deepwater KG1 had beaten the previous record of 10,194 feet by just 191 feet — an impressive feat at the time.

However, the company did it again less than five months later… with the exact same drillship.

And this time around, the Dhirubhai Deepwater KG1 squeezed out another 26 feet drilling off the coast of India.

Watching oil and gas companies drill deeper than ever shouldn’t shock anyone at this point, especially considering how far the world is willing to go to satisfy its oil demand. At last count, the International Energy Agency (IEA) expects global demand to rise by 1.2 million barrels per day next year.

And by now, it should be painfully obvious to everyone how far we’re willing to go to find it.

If it isn’t, allow me to show you…

Deeper Down the Oil Well

Truth is “unconventional” is becoming the new conventional.well depth chart 7-16

To the right, you’ll see the lengths (or the depths, in this case) companies will go to extract the world’s remaining oil and gas resources.

There’s absolutely no question whatsoever that we’re drilling deeper than ever before (click the chart to enlarge).

Decades ago, people never would have thought offshore oil production would play such a big role in global oil supply.

This also presents a tremendous opportunity… one that’s developing for the lucky few perfectly positioned to capitalize on global oil production moving offshore.

A $121 Billion Offshore Magic 8-Ball Prediction

Here in the United States, placing your oil bets is easier than most investors think.

Last month’s report on U.S. exploration and production spending by Ernst & Young proved as much to be true. After crunching the numbers for fifty of the largest oil and gas companies in the United States, the firm concluded spending on E&P activities rose to a whopping $185.6 billion last year.

I don’t think you’ll need three guesses to figure out where that $185 billion will be spent, especially after watching tight oil production in the United States increase dramatically over the last several years…

It only makes sense that these companies will go after those barrels hand over fist.

Now, that doesn’t necessarily mean you don’t have options beyond the U.S. shale patch — because although nearly every promising shale investment on the planet is tied to North America, offshore investments work on a global scale. And no matter how many times you shake your magic 8 ball, the outlook for offshore drillers is always good.

During the last ten years, nothing has stopped companies from spending more on offshore development worldwide — including plummeting oil prices in the latter half of 2008:

offshore oil spending 7-16

And it’ll be the drillers that’ll benefit the most — to the tune of $121 billion.

That’s how much the offshore drilling market is expected to grow over the next five years.

Of course, they aren’t the only ones in line for a huge payday…

The Good, the Bad, and the Ugly in Offshore Investing

As we’re well aware of by now, not all stocks were created equal.

The offshore sector is no exception to this rule. Some companies simply couldn’t recover over the last five years.

I’ll let you sort out the good, the bad, and the ugly for yourself:

offshore oil stocks 7-16

Sometimes it’s better to stick with the best performers…

Seadrill Ltd., for example, has four new ultra-deepwater drillships on order. Each one of these ships costs about $600 million and has a similar water depth capacity as Transocean’s Dhirubhai Deepwater KG1.

And even with the hefty price tag, the future still looks bright: Offshore production in the ultra-deepwater alone is projected to increase 400% by 2020.

A recent Wood Mackenzie report estimated that nearly 100 deepwater rigs will be constructed between 2016 and 2022. At current rates, that’s more than $60 billion that companies will dish out to build the rigs to fill future deepwater contracts.

We know there will be more companies challenging the depth record going forward.

And considering how quickly Transocean toppled its own depth record, don’t expect the latest to last very long…

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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