Another Tragedy Hits Offshore Drilling

Tragedy struck the oil drilling business yesterday off the coast of Russia. A drilling rig named Kolskaya, owned by Arktikmorneftegazrazvedka, sank while being towed near an island just north of Japan. At current count, four people died, 14 have been picked from the waters, and 49 are still unaccounted for.

I write this today not to break news or take a stance on the safety of offshore drilling. I bring this up to point out the risks that investors must consider when picking companies and stocks to invest in. While every company has risks, not every company's risks involve life and death. Oil drilling, like mining, construction, nuclear, and many other businesses, is inherently dangerous and can change workers' or an investors' fortunes overnight. In the last two years, the risks associated with offshore drilling have come front and center.

The Deepwater Horizon oil spill more than a year ago cost 11 people their lives and became a huge story for the environmental toll that lasted for months. This disaster will likely have a very minimal environmental impact but will have a much larger human toll.

Rig owners Seadrill (NYSE: SDRL  ) , Transocean (NYSE: RIG  ) , Hercules Offshore (Nasdaq: HERO  ) , and Noble (NYSE: NE  ) are all taking risks every time they head to work, especially in deep water. Sometimes we overlook that risk, sometimes we dismiss it as chance, but it's there for everyone involved.

This is something to remember, along with the workers who died, next time you look at investing in oil drilling stocks. A company's future can be turned upside down as fast as an oil rig can capsize and sink to the ocean floor.

Interested in reading more about oil drillers? Add your favorite to My Watchlist to find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium manages an account that owns shares of Seadrill. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Noble and Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 19, 2011, at 1:50 PM, dontwin wrote:

    As I understand it, Seadrill leases the rigs to other operators and doesn/t operate the rigs themselves which should take a good part of the risk away.

  • Report this Comment On December 19, 2011, at 3:52 PM, InspectorJavert wrote:

    The difference is that the world uses 90 MILLION barrels of oil every single day and rising, so no matter what happens we will continue to tap the ocean floor for oil. Technology has made it so we can minimize the occurances and damage that happens. Insurance premiums will go up to insure rigs, which will be passed on to the end-users ultimately. The drillers are quite profitable, and will continue to be so as long as the world keeps their insatiable thirst for fossil fuels. This is not an opinion, just an undeniable fact.

  • Report this Comment On December 19, 2011, at 5:52 PM, xetn wrote:

    Do you think that those companies might just have some insurance? Of course that does nothing for the people that perished, but it certainly does help offset any losses. After all, isn't that what insurance is for: reducing risk?

    As a matter of fact, there is nothing in this world that is risk free.

    This article makes me believe in your name containing the word FOOL.

  • Report this Comment On December 19, 2011, at 8:59 PM, joblock wrote:

    I, as an investor thought I was supposed to take some risk, and through diversifying and hedging, I could continue to enjoy significant profits.

    On another note:

    The bulk of HERO's assets are shallow water jack up rigs. Comparing Shallow water jack up rigs to Macondo is not logical.

    You can either take some risk and make some money with HERO, or just stand back and watch the rest of us.

  • Report this Comment On December 20, 2011, at 10:22 AM, artmuseum wrote:

    Amazing to me how some folks can find a negative spin on a most positive story!

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Related Tickers

12/17/2014 3:59 PM
HERO $1.16 Up +0.13 +12.62%
Hercules Offshore,… CAPS Rating: ***
NE $16.40 Up +1.41 +9.41%
Noble Corp CAPS Rating: ****
RIG $18.21 Up +1.43 +8.52%
Transocean, Inc. CAPS Rating: ****
SDRL $12.16 Up +1.16 +10.55%
Seadrill CAPS Rating: ****

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