There will probably come a time when the oil services sector is flat on its back and we look back and say, "Wow, how did drilling rates ever get that high?" But I don't think we're there just yet.
While there are some signs that more operators are willing to build new drilling rigs on spec, the overall demand for equipment has led to near-full capacity utilization and increasingly higher day rates. Good news, then, if you're the likes of Diamond Offshore
For this fourth quarter, GlobalSantaFe saw 98% utilization (up from 91% last year) and average daily revenue from drilling rise 34%. While revenue declines in drilling management kept overall revenue growth down at the 21% level, 20%-plus revenue growth is nothing to sneeze at. That's particularly true when it's coupled with significantly higher margins and major growth in operating income.
Honestly, there's not a whole lot that's really new here. The company continues to be concerned about rising labor costs (as well as the difficulty in finding qualified new employees), but day rate increases seem to be staying ahead of that particular cost curve.
GlobalSantaFe is right up there with Noble
These shares track the Oil Services HOLDRs
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).