BP’s big find is good news for these small caps
Today's Financial News - Posted September 2, 2009
BP has unveiled the results of its latest “giant” oil discovery. It is good news for the British driller, but fantastic news for small- cap players like Deep Down (OTC BB:DPDW) and Trico Marine Services (NASDAQ:TRMA).
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is a great time to be tapping new oil wells. As oil prices continue to remain in “elevated” territory thanks to fears of increasing demand and dwindling supply, uncovering a “giant” discovery is good for a company’s long-term outlook.
In the case of BP (NYSE:BP), its latest discovery could be worth more than a trillion dollars at current crude prices.
With its drills reaching into a pool estimated to be larger than three billion barrels of crude, BP makes it clear it won’t be running out of material to sell anytime soon.
While shares of the oil giant are up by more than 3% today, the majority of the benefits will not be seen for several years. According to some analysts, it could take as long as a decade to fully develop the find.
But when it happens, the new well, located 250 miles off the Texas coast, could boost production in the region by as much as 50% to 600,000 barrels of oil equivalent daily.
Drill, baby, drill
It is great news for BP, but even better news for the volatile deepwater drilling industry.
This latest find is not only newsworthy because of its sheer size, but for its location. The well is buried some 35,055 feet beneath the earth’s surface. A pool that deep was previously thought to be impossible to tap, but thanks to recent technological innovations, it is going to happen more and more.
Whenever we discuss the deepwater drilling industry, one company always comes to mind, TransOcean (NYSE:RIG). The $24 billion company is a deepwater drilling contractor with over 130 rigs spread across the globe.
It has more than enough potential to produce strong shareholder profits over the next few decades, but here at TFN you know we like to concentrate on the small, lesser-known players.
That’s where the real money is.
For the small-cap players, check out companies like Trico Marine Services (NASDAQ:TRMA) and Deep Down (OTC BB:DPDW).
The former is a $120 million contractor specializing in servicing and moving the world’s deep-water rigs. Its shares have more than doubled in the last couple of months as the world’s crude market has rebounded.
Today’s news will only bolster support for the offshore industry.
With a market value of just $20 million, Deep Down is a tiny fish in a big ocean. It offers a wide range of engineering services and products, specializing in the hardware between offshore rigs and wellheads.
If you are into penny stocks, Deep Down is worthy of your attention. With shares trading for just over a dime apiece, just a few bucks can grab you plenty of the upcoming action.
A quarter of a trillion dollars over the course of several decades won’t do much for a mega-producer like BP, but if one of these small caps gets even a trickle of the industry’s revenues, expect big things.
I know I am.
Next Article: TFN Grapevine Pick: Bergamo Acquisition Corp. (BGMO) is now on Readers’ Radar
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