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By all indications, it looks like oil drilling is back to normal and rig owners are raking in cash again. A year after the Deepwater Horizon oil spill affected drilling in the Gulf of Mexico and turned the industry on its head, business has returned.
During the third quarter, Noble (NYSE: NE ) revenue rose 20% to $737.9 million as utilization of the company's rigs picked up. Earnings jumped to $135 million, or $0.53 per share, from $54 million a year ago. Going forward, 81% of available rig days were under contract for the rest of 2011, compared to 72% last year.
The company is also expanding capabilities to meet demand for deepwater rigs. Options for two high-specification jackup rigs were exercised and another ultra-deepwater drillship was ordered from Hyundai Heavy Industries during the quarter. Rig owners like Noble, SeaDrill (NYSE: SDRL ) , and Transocean (NYSE: RIG ) are ordering deepwater rigs at a fast rate to fill demand around the world.
Rinse and repeat
The improvements at Noble were echoed at Diamond Offshore (NYSE: DO ) , where revenue rose 9.8% to $878.2 million and earnings jumped 29.4% to $256.9 million. That translates to earnings per share of $1.85 and analysts were only expecting $1.48 per share, but still the market hasn't gotten too excited.
It's all about the oil
The only problem I see with oil drillers right now is the relatively low price of oil. Today oil is trading around $85/barrel, a far cry from a few months ago when oil traded above $110/barrel. For this industry to maintain its growth, oil prices need to at least stop their decline of the past few months. If that happens or oil begins to rise, as I've predicted, I think oil drillers are in a perfect position to capture even more business.