A Tale of Two Contracts

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In the wake of Wednesday's big splash from Total's (NYSE: TOT) contract awards, two more offshore deals have made waves this week.

First up, we have Superior Energy Services (NYSE: SPN), the go-to oil and gas services company in the Gulf of Mexico when it comes to producing, maintaining, and decommissioning offshore wells. Not to be confused with Superior Offshore (Nasdaq: DEEP), a diving company experiencing a painful rebirth as a deepwater services company, Superior Energy is soaring.

That's partly thanks to Thursday's gigantic contract award to decommission wells for BP (NYSE: BP), Chevron (NYSE: CVX), and Apache (NYSE: APA). The $750 million order is fully one-half of Superior Energy's trailing-12-month sales. Shares rocketed higher on the news, and deservedly so, unlike that mystifying move in the solar arena.

Offshore driller Atwood Oceanics (NYSE: ATW), on the other hand, didn't budge on Friday after announcing a new-build semisubmersible contract win from Chevron. It takes about three years to get one of these behemoths delivered, so obviously this three-to-six-year contract won't be moving the earnings-per-share needle until 2011. In a sense, then, it's kinda logical that no one went wild for the win.

But while its near-term earnings power is unchanged, Atwood's business value is enhanced with the addition, so long as you believe -- as I do -- that deepwater rigs will be earning good rates of return in 2011 and beyond. I've written about being unimpressed with Atwood's fleet, and I'm happy to dial back my bearishness in the light of this excellent news.

 

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