I was referring to CAPEX on the customer side -- for example when Shell announced earnings yesterday they are cutting spending on drilling by $8 Billion.
Unfortunately, the off-shore drillers are experiencing a confluence of adverse events, supply surge, stable demand, cap-ex decline, utilization slump and day-rate compression. I would wait to commit funds until DOW is at 14,750 or below and look for another 20% downside to ESV with an entry point of $40/share. At $40 I would bet the farm!!!
I'm tapped out. I would probably wait to see if it goes lower. Selling is not at panic levels (see NE, RIG for very high-volume selling. Maybe ESV management should start their $2 billion stock buy back at these levels!
The selling here is way overdone! It's not like they are going out of business tomorrow -- even if day rates their new rigs should provide efficiencies that drive cost savings..
Seems off shore drillers way out of favor -- demand not as strong as projected at a time when supply is spiking. I don't think a long-term investor will lose money in ESV -- but there are short-term headwinds and stock will probably be range bound for the next several months.
On the positive side, oil is up 2% today.
Deep water drilling is still quite profitable at those price points. And I would think that most of the oil ESV is drilling goes at the higher Brent price. Also, ESV has over $11 Billion in contracted sales (10 quarters worth), a ~30% net profit margin and a great safety and customer service record. Debt-level is reasonable (about 30%) and dividend payout is
The price of Brent as well as WTI have fallen recently and are expected to be range bound due to supply-side affects of Iranian oil returning to the market. This is surprising though -- one would think the 5% dividend would support stock price in the mid to high 50s. I guess not.