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.
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