Transocean Inc. (RIG)

It's stuck below $10. Flatlined for so long. Wouldn't buy it.

This is definitely on the whippy end of the spectrum for drillers. Ultimately, you really have to believe that energy is turning. He doesn’t see sufficient evidence to make that claim.

The whole energy complex is falling today. There are concerns that people priced in too much growth in some of the pro-growth policies Mr. Trump wants to push, which are going to come later and more diluted. However, this is a survivor in energy and is the go-to company when it comes to deep-water drilling. Energy prices are still too cheap, and over the long haul they are going to drift higher, and this company will be a beneficiary. You could use pullbacks like this to add to your position.

It is a rig company and so is suffering badly. It is bleeding cash right now. It is too early to get into the oil related sector and this is a risky type of company.

One issue with these companies is where does oil go? This was trading at some value below the value of their actual rigs out there. He believes oil will be higher over the longer-term and this is a good company. If you compare the volatility over the next little while, it will do well and you can see a reasonable rate of return on it. Probably worth buying at these levels.

These stocks have been hammered down because they are dependent on others. This is well-run and there has been some consolidation. Expects there will be some near-term negatives before you see the ultimate positives.

Big in offshore drilling. You could make a case that the value of the rigs is worth more than the share price right now. Oil/gas business is in a difficult environment, especially on the offshore side where costs are much higher. Expects oil will go down a little bit more when you will have a better opportunity to buy it.

As of last week, this traded under his EVB -3 at $24.61 and is now down to $19.90. His strategy suggests that there will be some large write-offs coming. The dividend is not safe.

Looking at what is happening in offshore drilling right now, there is still too much supply and pricing is coming down. Thinks the company has been mismanaged for the last couple of years.

Gigantic off shore driller. It is suffering as are all the drillers. They took a write down on assets from when they were buying new rigs that were expensive in comparison to today’s. 8 times earnings, but there is no catalyst right now. They are tidying themselves up and it might mean a re-adjustment to their dividend as well.

Drillers have probably been unduly punished, but it is not a surprise. They are affected by long dated events. The big oil corporations make capital allocation and expenditure decisions many, many years in advance. With oil prices dropping in the $80 range, there is a lot of fear that these drillers are going to lose contracts and have idle rigs. Management has been questioned as they have done some questionable things. He prefers Ensco (ESV-N) whose fleet is much newer and their utilization rates are much higher at 96%.

The stock has been cut in half from a year ago and is very attractive here because somewhere here oil bottoms. This stock could see more volatility and fall another 20%, but look out 5 years and it is very attractive.

When looking at drillers, you have to ask about utilization rates. You also have to look at day rates, how much they’re getting for their rigs. The whole industry has been in a bit of a downward trend and he thinks it has gone too far. It is sort of built on the fact that it is very, very costly to do offshore drilling and we have greater and greater opportunities for energy recovery on land based facilities. There will be an opportunity for these companies. His favourite is Ensco (ESV-N), which has the youngest fleet. Also, they made a very strategic buy of Pride at the depths of the last cycle. Because they have the youngest fleet, the utilization rates tend to be higher because they are not in dry dock for repairs as often. Trades at about 10X. Pays a 5.9% dividend.

This is a name that is worthwhile doing research on but doesn’t feel this is the right opportunity to Buy. Has a lot of hair on it and an older class fleet. One with a much better balance sheet and a much better driller would be Ensco (ESV-N). This gives you the protection of the balance sheet and a management team that is the best in class fleet. Doesn’t feel offshore drilling is a place you want to be.

From a drilling point of view, there is a decent backlog. Day rates are very expensive right now and for the ultra deep rigs there is a bit of a shortage. This is a sector that he is looking at. It tends to be a trade because it is highly cyclical.