10-year

10-Year Anniversary Promotion (20% off)

Join GuruFocus Premium Membership Now for Only $279/Year

Once a decade discount

Save up to $500 on Global Membership.

Don't Miss It !

Free 7-day Trial
All Articles and Columns »

Noble Energy Becomes First Company to Receive Approval for a Deepwater Well Since the BP Oil Spill – What Do We Do Now ?

March 01, 2011 | About:
CanadianValue

CanadianValue

212 followers


It took 10 months, but Noble Energy yesterday became the first company to get the go ahead from the BOEMRE to drill deepwater well.

http://www.bloomberg.com/news/2011-02-28/first-gulf-of-mexico-deepwater-drilling-since-bp-spill-is-approved-by-u-s-.html

Director Bromwich said the following about the well being approved:

“The application has met our new standards for well design, casing and cementing,’” Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said on a conference call with reporters today. More permit approvals are expected in “coming weeks or months,” the bureau said in a statement.

I don’t know if it took this long because the government was actually being careful and waiting for sufficient spill response equipment to be available. Or if this was President Obama’s way of signaling that he does not answer to big oil companies.

Quite frankly. I don’t care.

What many of us value investors should be doing is sending a big “thank you” to the folks at BP for giving us one of those rare opportunities that we wait for. You know, an opportunity to buy assets and cash flow streams at huge discounts from their actual value.

A couple of pretty well known value investors took advantage of the opportunity:

David Einhorn made Ensco (ESV) a core holding during the height of the 24 hour a day 7 day a week television coverage of the oil spill.

And Whitney Tilson made BP itself a core holding and turned it into his own television program by getting on CNBC and talking about it every week during the height of the crisis.

I bought and wrote about a number of opportunities shortly after the spill:

Ensco on July 1, 2010 – Share price $39.28 – Current Share price - $56.10

http://www.gurufocus.com/news.php?id=98829

And yes, I wrote that before the Einhorn disclosures….

Cobalt on July 28, 2010 – Share price $8.46 – Current Share price - $15.66

http://www.gurufocus.com/news.php?id=101391

Diamond Offshore on July 31, 2010 – Share price $59.49 – Current Share price - $78.23

http://www.gurufocus.com/news.php?id=101737

Stone Energy on Aug 15, 2010 – Share price $11.77 – Current Share price $30.28

http://www.gurufocus.com/news.php?id=104529

ATP Oil and Gas – Several Times From $8 to $14 – Current Share price $20.33

http://www.gurufocus.com/news.php?id=105495

Looking back on it buying these stocks seems like picking candy from a baby. The reality is that it wasn’t so easy. We had Anderson Cooper on CNN every night promoting the end of oil. We had politicians threatening all kinds of things. And we had a drilling moratorium.

I waited until I understood the government proposals for liability cap increases until I bought and recommended the producers like Stone, Cobalt etc. Ensco I thought could move its rigs anywhere in the world and thus wasn’t as dependent on the US Government legislation.

Now with this drilling permit approved, many investors are finally willing to pile back into these stocks. As a value investor I’m heading for the exits. I’ve already taken some profits on some of these, and will likely sell the rest of my positions in the next week or so.

I’ve found some interesting investment opportunities on land in Canada in the oil sector. I think I’ve had enough of the ocean for a while. It turned out to be lucrative, but at times was a bit stressful.



About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

Rating: 4.4/5 (15 votes)

Comments

guruburu
Guruburu - 3 years ago


.
guruburu
Guruburu - 3 years ago
Swizz,

In regards to ATPG, which is one of the companies from your list that I own and follow, I strongly suggest you reconsider your idea of selling now.



When a value investor finds a 30 cent dollar, and the 30 cents move to 60 cents and back to 30 and then once more move up to 60 cents, one is, no doubt, tempted to take the nice 100% profit and move on. But why???



The exact same reasons that made ATPG attractive are still there now, plus some others. One could argue that the margin of safety is not as big, but on the other hand, most of the potential dangers to the company have been either eliminated or significantly reduced.



Now, of course, if you believe that you can exchange the 60 cent dollar for a Bakken 30 cent dollar, then by all means do it. I am just a little sad to have read this article. It sounds like you are giving up more on the basis of exhaustion rather than valuation.



Good luck whatever your decision, and thanks for bringing ATPG to the attention of many of us.



Regards!
cubsfan
Cubsfan premium member - 3 years ago
Swizz--

Your insights on these were right on, and you're correct, it was very difficult to buy

many of these in light of the events and press coverage. Looked easy, but not.

Thanks for all the great articles.

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK