Noble (NE): Power Oil Play

June 16th, 2009

Noble Corporation (NE)

Noble Corporation principally provides contract-drilling services for the oil and gas industry worldwide.

What I Like

With NE share price currently at $34.40 its shows the company is on an uptrend when valued against the 50-Day Moving Average, which is $31.75. With a 52-Week High of $68.99 (June 08) and a 52-Week Low $19.23 (Dec 08) the stock has seen the share of volatility that the markets have experienced. I foresee Noble being a strong player in the oil and gas industry as there revenue stream is well-protected by the $10.6 billion of contract backlogs which equals out to around 18 months of work for every rig in their fleet. Analyst’s reports see revenue in 2009 rising 5% up from 6% to 11%.  Supply and demand fundamentals are stronger than thought for deepwater-cable units such as Noble. Long-term I expect for the contract drilling to rise in the U.S. and expect it to be even higher overseas as oil companies continue to explore less mature regions for oil. Daily Volume is above 100,000, which is the threshold in which I set. They have outstanding numbers with a 30.85% return on equity and 18.04% return on assets. Another plus is the company is not in debt and has cash on hand top help expand their worldwide brand.

What I Don’t Like

The current global crisis is the only thing holding this company back yet when you factor in that many economists predict oil and gas prices to rise another 15%-20% resulting in a resurgence in worldwide oil drilling.

Overview

Overall Noble is a solid stock and a great buy if you are interested in the Oil and Gas Industry. At $34.75 a share I like it all the way up to $40 and see a 12-month target price of around $50 due to calculated EPS and P/E Valuations.

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