Thoughts on RIG?

They say to be greedy when everyone is fearful and that it is darkest just before sunrise, but man it's a tough outlook for drillers right now.

They will need a ~50% increase in oil prices before drilling budgets get expanded.

They are about to get a new CEO who will likely be very successful over the next 5-10 years. Very respected man in the industry.

Carl Icahn is a big shareholder.

It may go down further, but when oil gets back to 60 to 80 RIG will thrive

Budgets for 2015 are already set. $60 oil wont be changing those budgets.

How much have they budgeted for ongoing litigation? That might be a concern.

For what it's worth, the CEO bought 9800 shares on December 1st. Also a positive institutional ownership trend in the current quarter; 34.7M shares purchased vs. 21.1M sold. Icahn has 5.75% of outstanding shares. This is not investment advice, etc.

RIG has been a poorly managed company for some time, they were and still are one of the most top heavy drilling contractors around. If they are able to cut the support staff fat and a new CEO is even barely competent they may survive. If not.. JMHO

Another thing you may want to keep in mind is that all the majors, the majority of their clients, are cutting way back over the next 3-5 years. I havent looked to see if they have outlined what they planning on cutting back on but it is something to keep in mind.

If you believe the drillers are oversold, buy the best in class. In this case, I believe it to be SDRL, not RIG. SDRL cut their dividend and will instead pay down debt and buy back stock, great long term moves while the stock price is depressed and debt will be coming due at less favorable refinance rates. Also, they have the best fleet of the big drillers so they will have the best shot to win work once deep water drilling eventually picks back up.

Best of luck- I think of the long term, it is cheap but in the short term, they will probably take a hit if they have to cut their dividend or if oil doesn't recover. My opinion is that since SDRL already cut the dividend and has a better fleet, they have positioned themselves to ride this out better. I think they are both poised for success over the long. I just think SDRL has a little less downside.

I have been eyeing XES since this whole oil debacle happened. I will start to buy XES soon, among others, but most likely the only oil services type stock that I will buy.