Offshore Drilling Stocks

Written By Brian Hicks

Posted April 4, 2010

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.


Let’s keep this short so you can get back to celebrating the Easter holiday.

Obama wants to lift the ban on offshore drilling, but not everyone is for it.

Go figure.

But we’re not looking to delve into an argument of who’s right or wrong. We’re investors. We want to know where to look for profit if all goes according to Obama’s plan.

After taking on health care, the auto industry — and quite possibly the financial industry — Obama just announced he’ll lift a ban on offshore drilling for oil and natural gas, which will create jobs, generate revenue, and reduce our dependence on foreign oil. (The Saudis aren’t quite shaking in their boots from this news… )

Provided that coastlines are protected, Obama’s plan is to allow drilling off the Atlantic coast, the Gulf of Mexico, and parts of Alaska — a plan which should help us provide our own energy.

Some of the proposed areas of exploration are off the coast of Virginia, which could hold 130 million barrels of oil and 1.14 trillion cubic feet of natural gas, and the Gulf, which could hold 3.5 billion barrels of oil and 17 trillion cubic feet of natural gas.

So how do you profit from the news?

According to Pure Asset Trader (currently 50-for-52 after a 40-for-40 run):

  • Oil and gas equipment companies — such as Halliburton (HAL) and Baker Hughes (BHI) — would definitely see a boost from more exploration.

  • Oil and gas exploration companies could find and develop new oil and gas discoveries, which would lead to more proven reserves and potential profits. Companies like Devon (DVN) and EOG Resources (EOG) could benefit.

  • And oil drillers could join the ranks of those that see a benefit from increased drilling activity; check out Transocean (RIG) and Atwood Oceanics (ATW).

But just because some companies will see a profit from the decision to lift the ban on offshore drilling, that doesn’t ensure everyone’s happiness. While some argue that the move will create new jobs at home, others argue that the plan could kill off jobs, kill marine life, and kill coastal economies that generate billions of dollars. Green Chip and Energy and Capital covered the news for Obama’s proposal this week; you can catch those stories here and here.

As for other places to look for profit opportunities…

  • As Blockbuster (BBI) slips closer to bankruptcy, competitors like Coinstar (CSTR) are pushing toward $35 as competition in the video-rental space could soon decrease. Carl Icahcn has finally given up on the stock days before a big debt payment of $43 million on senior secured notes, which could hurt liquidity and cut into the $189 million cash the company had in January 2010. The best move here: buy Coinstar as Blockbuster nears bankruptcy.

  • As for all the questions and calls to short Apple post-iPad launch, be cautious… It seems that every major launch is met by new all-time highs from the company. The coming launch of the iPad is really no different, as the stock’s market cap nears $215 billion.

Will Apple fall before or after the launch? Should we buy the hype and sell the news? You can always use a put option to take advantage of possible “hype dying” sell-offs. But if you really want to risk a trade on Apple downside here, only buy one or two put option contracts. You can buy April 2010 puts but risk time decay erosion. The April 230s, for example, are still a much better deal than the May 230s. Personally, though, I wouldn’t risk it. Premiums are much too high and time decay erosion is going to kill the trade. 
  • Keep an eye on the financial industry and possible reform. Moody’s and S&P believe the big banks’ credit ratings would be reduced if Uncle Sam stops supporting them. My heart goes out to them…

  • Starting this year — if not already — Social Security will pay out more in benefits than it takes in… about six years early. And, of course, it’s the fault of the unemployed. With so many people out of work (more than 16%), there’s not enough revenue coming in, and not as much as was expected. If we’re lucky, the fund will have enough money to survive until 2037. Fasten your seatbelts.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

P.S. In case you missed any of the week’s top-read articles from Wealth Daily and our sister publications, you can catch up on them now:

Savers Get the Shaft: The Bean Counter’s Guillotine
Wealth Daily Publisher Brian Hicks brings readers a piece on the coming War on American Retirement. The following revelations may surprise — and alarm — you.

Chinese Cleantech Companies: Up for Grabs: $94.7 Million Per Day
Editor Nick Hodge discusses how Chinese cleantech companies are outperforming their competitors — and how you can profit as it happens.

The Natrona Challenge: Putting our Money Where Our Mouth Is
A year and a half ago, we at Wealth Daily put our money and reputation on the line by promising to deliver 20 double-digit investment gains over the course of one calendar year. If we couldn’t hold up our promise, we’d fork over $1,500 to each person who took us on. Turns out, we didn’t have to write a single check… Read more about how you can join us for our next promise-for-profit Challenge.

Google vs. China: It’s Not Over Yet: Is Google Really Leaving?
Wealth Daily‘s Adam Sharp explores the battle over censorship and search dominance in China.

Unique Water Investments: The Commodity War About to Commence
Energy and Capital Editor Nick Hodge discusses outside-the-box water investments as related issues continue to surface all over the globe.

Funding the U.S. Debt Binge: Are Guaranteed Retirement Accounts the Answer?
Editor Steve Christ takes looks at the federal deficit and explains exactly what Guaranteed Retirement Accounts will really do… fund U.S. debt.

Foreclosure Fortunes: Simple Ways to Profit from Foreclosures
Read more as this real estate mogul explains why 20 million properties will be foreclosed by 2012… and how it could be profitable for you!

Investments in the Clean Energy Sector: Sifting for Profits in Billion-Dollar Data
Green Chip Editor Nick Hodge takes a look at past clean energy sector investments in search of profitable future trends.

Officials Wake Up to Peak Oil Part 1: The End of Peak Oil Denial

In this first part of a two-part series, Energy and Capital Editor Chris Nelder outlines several new studies suggesting oil production will soon go into permanent decline, and how officials outside of the U.S. are beginning to come to grips with reality…

 

Gold ETFs – Paper vs. Bullion: Your How-To Guide for Investing in Gold ETFs
Wealth Daily Editor Luke Burgess gives a detailed account of the current gold ETF market.

Breakthrough Biotech: The Little Outfit About to Be Demise of Disease
Nine major diseases kill more than 360,000 Americans annually — that’s 7 times the number of people killed in the Vietnam War. But one tiny, all-but-ignored bio-pharma company right here in the US of A owns the breakthrough that could soon render all these millions of deaths a thing of the past. WD reveals the name of this stock in our latest report. 

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