I wrote yesterday about the inevitable long-term rise in the price of oil, current recessionary pressures notwithstanding. I mentioned that at the end of the current leg down, I would be looking into buying leading oil-industry investments, such as Transocean (RIG).
Several people wrote to say that Transocean is one good idea, but that Noble Corp. (NE) is better. By almost any long-term valuation analysis, each driller is cheap these days. Which is cheaper?
12-Month Trailing Price-to-Earnings (P/E)
NE: 7
RIG: 8
5-Year P/E-to-growth (PEG)
NE: 0.6
RIG: 0.5
Price-to-Sales (P/S)
NE: 3.0
RIG: 2.2
According to Morningstar’s analysis, NE closed yesterday at a price 10% below its fair value of $46, while RIG closed yesterday at a price 29% below its fair value of $116.
While both are cheap, Transocean is a tad cheaper. Also, its specialty of deepwater drilling will be in high demand as conventional sources of oil dry up.
Disclosure: I do not yet own shares of either NE or RIG.
