Noble Energy Becomes First Company to Receive Approval for a Deepwater Well Since the BP Oil Spill – What Do We Do Now ?
It took 10 months, but Noble Energy yesterday became the first company to get the go ahead from the BOEMRE to drill deepwater well.
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
And yes, I wrote that before the Einhorn disclosures….
Cobalt on July 28, 2010 – Share price $8.46 – Current Share price - $15.66
Diamond Offshore on July 31, 2010 – Share price $59.49 – Current Share price - $78.23
Stone Energy on Aug 15, 2010 – Share price $11.77 – Current Share price $30.28
ATP Oil and Gas – Several Times From $8 to $14 – Current Share price $20.33
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.