In comparison, National-Oilwell Varco, Inc. (NYSE:NOV) controls 60% of the drilling-equipment market and generates $21 billion in sales annually; double that of Cameron. However, National Oilwell’s stock is still cheaper than Cameron, trading at a price-to-sales ratio of 1.4 compared to Cameron’s ratio of approximately 1.6 and a trailing 12-month P/E ratio of 12.8 compared to Cameron’s ratio of 19.4.
Still, despite National Oilwell’s size, the company is no more efficient. For example, National Oilwell achieves a return-on-equity of 12.1% and a return on assets of 7.9%, while Cameron achieves a return-on-equity of 12.6% and a return-on-assets of 6.3%.
So, both companies offer their advantages.
What about Rowan?
As I have mentioned above, Rowan is well placed to ride the decline in jack-up day rates over the next few years. And with four new drill-ships generating an additional $2.4 million in revenue per day, which is roughly $218 million per quarter (almost 55% of the company’s existing quarterly revenue,) this indicates that Rowan is set for a 50% earnings increase as the ships are delivered through 2016.
Having said all of that, a company that is in an even better position to profit and is currently trading at a lowly valuation is Ocean Rig UDW.
Ocean Rig is a UDW and harsh environment drilling specialist with eight UDW high-spec drill ships and two rigs. Currently, the whole fleet is leased to oil and gas majors, with an average duration lasting until 2015. Ocean Rig has a net-asset-value of $22.30 per share, indicating that the company can currently be bought for less than the value of its assets. On a long-term basis, the company should be due for a re-rating higher as demand for its experience and specialist fleet grows.
Foolish summary
Rising demand for new UDW rigs and drill ships should boost National Oilwell and Cameron over the next few years, while the rising demand for experienced UDW drilling companies will boost Ocean Rig and Rowan.
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The article The Best Investments for the Expanding Oil-Rig Market originally appeared on Fool.com and is written by Rupert Hargreaves.
Fool contributor Rupert Hargreaves owns shares of National Oilwell Varco. The Motley Fool recommends National Oilwell Varco. The Motley Fool owns shares of National Oilwell Varco. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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