Dicker: Look Offshore for Real Value

NEW YORK (Real Money) -- I've been watching the late-spring market swoon through the prism of oil prices. Recently, I have written that oil price action, as bad as it's been, has been telling me to slowly start coming out of cash and into energy stocks. But where exactly? One place to look for some real value is with the offshore drilling companies.

From a very wide, macro view, offshore drilling represents a great place to start re-entering the energy trade because offshore profitability is almost entirely based on crude oil pricing (despite yielding plenty of natural gas). I have been convinced that crude oil prices will inevitably find a bottom in 2012 that is well above the prices we saw in 2011 -- well above $100 a barrel in global average price. This will make the most challenging of offshore operations, using the deep and ultra deep water rigs owned and leased by companies like SeaDrill, Transocean, Ensco and Rowan, increasingly profitable moving through 2012 and into 2013.

But not all inside this sector are created equally. SeaDrill has been the steadiest performer this year -- undoubtedly because it delivered a massive dividend of more than 8.5%. I believe that dividend is safe, and if your goal is just to collect that divvy, you need look no further. But SeaDrill is truly firing on all cylinders right now, and has almost nothing to further contribute in efficiency. Other drillers that have notably underperformed Seadrill are ripe for recovery, particularly Transocean and Rowan. ...

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