By OGJ editors
HOUSTON, May 10 -- Although return on capital employed (ROCE) has been poor during the last decade for the eight largest offshore drilling companies, that situation is turning around now, said oilfield services and drilling equity analyst John Kartsonas, in a newly released report by Standard & Poor's Equity Research Services.
Except for short periods of overall strong returns, such as during an industry upturn in 1998, Kartsonas said, "from the long-term investor's perspective, offshore drillers as a group have destroyed value on a risk-adjusted basis" during the past 10 years,.
"Although during the two past cycles—1998 and 2001—investors who timed the market well would have had realized superior returns," he said.
Now, a major longer lasting cycle is starting, he said, one that should provide greater returns for shareholders who have a long-term investment horizon and the patience to wait.
"The group should perform well from this point forward," Kartsonas said. "Fundamentals continue to be very strong, with oil prices approaching record levels and global demand high." He said time would work in favor of the drillers. "As demand continues to increase and supplies become scarcer and more difficult to develop, the demand for offshore drilling should continue to increase."
