It is a contractor, with limited ability to grow earnings. It is also limited by people, as those that know how to operate their rigs are old and tiring. They just want to cash in one more time, on the options.
Remember, NE was NDCO, and sold at 2 5/8 just 6 years ago. I bought below 5, and sold last year.
Those rigs are not made of titanium. Do you know what their lifespan is? Think about it.
Re. Lifespan, not made of titanium, etc. All true, but the more rigs depreciate and the more rigs that are removed from the available pool thru attrition, the scarcer the supply. This will translate into higher day rates and utilization rates eventually. So your statement about limited ability to grow income is only partially true. Day rates can rise another 50-60% from current before the market could support significant new building. My view of drillers is that you are not only buying a potential revenue stream, you are buying part of a dwindling pool of capital assets. It may not work for every investor, but it works for me, particularly with contractors in the offshore segment, where the asset base is relatively small vs. land drillers.