The benefits and drawbacks of offshore drilling have long been debated. But life after BP’s (NYSE: BP) Deepwater Horizon oil spill not only brings in an even more heated debate, it also introduces new troubles for domestic offshore drillers in the form of an offshore drilling ban (which ended in October) and the slow issuance of drilling permits post-ban. In fact, permits are being issued so slowly that USA Today reported on January 17th that only two permits had been issued since the ban was lifted. You can’t really put that into perspective until you realize that pre-ban, an average of 5.8 permits were issued each month.
Despite the spill, the ban, and the post-ban slow permit issuance, there are some offshore drill stocks that have spent the last five months rising steadily in price. One of these is SeaDrill (NYSE: SDRL), which operates on four continents and 15 countries. Last week, model manager Vivian Lewis added shares to the SDRL holding in her International Yield model.
Regardless of any slowdown on U.S. permits, SDRL is moving forward with its plans expansion. In December it announced a firm 2-year contract for a newbuild tender rig with BP Trinidad and Tobago LLC and in January it agreed to acquire two semi-submersible ultra-deepwater rigs that are under construction. As a result of some of its new acquisitions, the company’s debt has increased, but since these acquisitions add value to the company’s business, it might not be something investors need to get too concerned about.
