Shares of RigNet Inc. (NASDAQ:RNET) rallied on Thursday, closing more than 10% higher on the day even though there was no news relating to the company. Instead, the offshore communication company's surge seemed to be fueled by higher oil prices and a bullish report by offshore driller Ensco (OTC:VAL).
Crude oil finished the day higher, which provided a lift to most oil stocks. The global benchmark, Brent, rose 0.8% and closed at $74.54 a barrel while West Texas Intermediate, the U.S. oil benchmark, increased 0.5% to $69.61 a barrel.
Driving those gains was news that Saudi Arabia temporarily stopped shipping oil through the Bab el-Mandeb Strait, which connects the Red Sea with the Gulf of Aden, after Yemeni rebels attacked two crude-carrying ships on Wednesday. This region is a crucial oil chokepoint, as roughly 10% of seaborne oil trade flows through it each day. Continued attacks could disrupt the supply of oil, which could push prices even higher.
Meanwhile, offshore drilling stocks got a boost from Ensco's second-quarter report, which drove its stock up 6% on the day. While the offshore driller posted a $0.30-per-share loss, that was $0.01 per share better than analysts' expectations. Furthermore, Ensco had positive things to say on its accompanying conference call. Its CEO Carl Trowell stated:
We have also seen an uptick in direct discussions with customers regarding new contracts and extensions of current contracts. Not all of these tenders and inquiries will result in additional work, but we have seen a noticeable shift in our customers' attitudes toward offshore projects recently, which we expect will provide a healthy pipeline of work in the years to come.
That uptick in drilling work bodes well for RigNet, since it should be able to provide communications and other services to these rigs as they hit the open seas in the coming quarters.
There's growing optimism that the oil market will continue to strengthen. Rising oil prices are giving oil companies the incentive to start up new offshore drilling projects, which will eventually benefit RigNet. That bullishness seems to be what's driving its stock up today.