Getting positioned in offshore oil
This stock has long been one of my favorites but now that it’s back to a moderate price there is plenty of reason to love it. Rowan Companies (RDC) leases offshore drilling platforms to oil companies who use them to bring up from the depths of the sea. With oil prices at a new high, the company has been able to lease some drilling equipment for record amounts of money, some for over $300,000 per day.
The giant is involved in virtually every part of bringing oil to the surface. It has a small building operation that sells rigs to oil companies, it also leases a total of 60 rigs and platforms for offshore oil drilling. The best part about what Rowan does is that it’s not tied to the up and down in oil prices, Rowan locks in its rigs in contracts that are not based on the price of oil. As those contracts expire, surely the price will jump considerably to cover $130 oil.
If the Offshore drilling ban is dropped in the United States this is one stock that will profit heavily. Even with the ban, Rowan trades at an amazing PE of 9.6 and a PEG ratio of .65. While the stock grows at an annual clip of 15% in earnings, the run up in oil is unlikely figured in to many of its oil rigs. When the contracts are renewed, the earnings for Rowan will skyrocket. Not to mention the possibilities if the offshore drilling ban is released.
Take this one for a value play and hold onto it, with a multiple this low you can afford to hold onto it. In the meantime you’ll collect a decent 1% dividend yield.