Posted: February 6, 2008

Want to make some money during the period of global oil scarcity that Charles T. Maxwell, “dean” of energy analysts, says is right around the corner? According to Maxwell, there is money to be made in oil drilling companies, especially those with the equipment to tackle the new frontiers of the business, namely deep oil drilling in the bottom of the ocean.

During a lengthy discussion with EnergyTechStocks.com, Maxwell, senior energy analyst at Weeden & Co., said a lot of oil and natural gas is going to be recovered from new fields that lie beneath 4,000 to 8,000 feet of water, plus another 15,000 to 20,000 feet of land below that. While he said that all this new energy won’t be enough to prevent a “peak” in liquids production in 2015, it should do wonders for the bottom lines of several oil drilling companies.

Maxwell said that seismic studies are showing that there should be a lot of oil and/or natural gas fields in deep water off India, China, Australia, Russia, Indonesia, the U.S. Gulf Coast, the North Sea, Brazil and Angola. While these new fields will be extremely expensive to exploit, he said that they should be affordable when, as he predicts, oil is selling at roughly $150 to $160 a barrel (in today’s dollars) in seven or eight years time.

Deep oil drillers may make investors a lot of money in two ways, Maxwell said, reiterating what he first said on the PBS program Consuelo Mack’s Wealthtrack. On that program Maxwell said, “Offshore drilling will continue to be very profitable. The oil companies can finance it quite easily with their cash flows.” He added, “There will be acquisitions as the industry consolidates. There are eight of them. I think there will be four of them in three or four years.”

As he first indicated on Wealthtrack, Maxwell’s top drilling pick is Pride International Inc. He told EnergyTechStocks.com that while Pride is known for its rigs that work in shallower water, 70% of the company’s assets (in terms of value) are tied up in deepwater rigs (three drillships and 11 semi-submersibles), with another couple of rigs on order. Maxwell further expects Pride to be one of the companies that ultimately gets acquired.

For similar reasons, other drilling companies that Maxwell said should do well include: Transocean Inc., Noble Corp. and Diamond Offshore Drilling Inc. They are among a group of 10 or so drilling firms that Maxwell said already are “making a terrible lot of money.” As evidence of that, Maxwell said that two years ago this group collectively had about $32 billion debt, while today it’s only about $2 billion.

Coming tomorrow, February 7 – Part 4 of the Maxwell series – governing like it was World War II?