Collin Gerry of Raymond James in a recent interview as part of our Oilfield Services report gave us his views on deepwater;
Mr. Gerry: The only side of the energy complex that we are bullish on right now is deepwater. If you take a step back and you look at the global picture for oil supply, we’ve picked all the low hanging fruit. A lot of highly prolific areas of the world have seen peak production, areas that now include Russia and Mexico. The North Sea and the US have been in a state of decline for a while now. The next frontier is deep water. The reason I say that is because we’ve had some geological success there. Brazil has certainly made some pretty significant finds off their coast. The US Gulf of Mexico is a very prolific deepwater market, as is West Africa, and now you’re starting to see places like India and China bid for deepwater rigs and try to explore some of their opportunities. Thematically, I would say it’s deep water, because it’s an oilier play, and from an oil service perspective, it’s a less volatile play. Deepwater development can take five to 10 years, so you don’t care if front month oil goes from $60/bbl to $40/bbl. It’s a long-term investment perspective — you are looking at what oil will average over the next 10 years. It’s not as volatile as some of the shallower stuff or some of the land drilling in North America. The deep water is where we are positioning our recommendations.
Deepwater isn’t as volatile as land or shallow drilling. With a 5 to 10 year development process you are looking at a more longterm less erratic investment with deepwater companies.
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