Falling oil prices proved to be no problem for Transocean (RIG) in the third quarter. The company shattered earnings estimates, posting earnings of $1.37, well above the $0.76 analysts expected.
The main reason Transocean isn't hurt by falling oil prices is that Transocean doesn't actually sell oil. The company leases its drilling rigs to oil companies who are involved in exploration and production. These leases are long-term leases, so while the day-to-day price of oil may impact the oil companies, Transocean is fairly insulated from price fluctuations. A perfect illustration of this is the recent 10-year contract that the company attained with Royal Dutch Shell.
Another factor in the company's favor is the recovery in drilling activity in the Gulf of Mexico. Rival Baker Hughes recently reported a 60% increase in drilling rigs in the Gulf.
So if you are worried about the impact that falling oil prices could have on your energy investments, consider moving away from big oil and heading into Transocean. As drilling demand increases, Transocean will be there to handle the world’s need for new rigs.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.