One Driller Definitely Worth Looking At

This article is part of our Rising Star Portfolios series.

Yesterday, oil and gas drillers got a big lift as the quasi-moratorium that was lifted from companies in October got some much needed lip service from the Obama Administration.

On Monday, the Wall Street Journal reported that the administration had paved the way for 13 companies, including Royal Dutch Shell (NYSE: RDS  ) and Chevron (NYSE: CVX  ) , to continue drilling wells that had been previously approved before the BP debacle.

Offshore drillers like Diamond Offshore (NYSE: DO  ) , Transocean (NYSE: RIG  ) , and Noble (NYSE: NE  ) all saw gains yesterday of more than 3%.

What does this actually mean?
It's true that many major players didn't expect to get permits for new drilling until late 2011 or early 2012, so it's not like the federal government was out there handing out new permits like Christmas toys. However, it's definitely a step in the right direction. According to Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation, and Enforcement, "For those companies that were in the midst of operations at the time of the deep-water suspensions, today's notification is a significant step toward resuming their permitted activity".

Over the past few months, the drilling segment of the energy industry has been clouded in pessimism and uncertainty, and the steps taken Monday didn't lift the cloud entirely -- but they certainly are a silver lining. And for any value investors out there, I'd urge you to take a look more closely at Diamond Offshore -- I'm doing that for my real-money Motley Fool portfolio as of this month.

Diamond is a contact offshore driller with around 47 rigs and a market cap of $9.7 billion. It often gets overlooked by larger players like Transocean or Halliburton (NYSE: HAL  ) , but it's a major player in its own right. Granted, it has an aging fleet and doesn't have the deepwater experience that its peers have, but it's been able to maintain good mid-water day rates and has still taken a terrible beating this past year. Despite not being involved in the BP oil spill, Diamond has seen its share price drop by 32% -- way more than most of its peers. Additionally, in comparison to 2009, it's been able to diversify its revenue stream away from the Gulf of Mexico and more toward other parts of the world.

I think if the company has the ability to use some of its extra cash on hand to buy some more advanced rigs and stay competitive in the market, I think Diamond could be a great value play as the oil and gas sector starts to heat up.

Stay tuned to see if I decide to add a position to my portfolio.

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