Who to watch (and own)
In the high-tech hydrocarbons game these are our four picks: General Electric (GE) for subsea infrastructure; Transocean (RIG) for deep and ultra-deepwater rigs, Schlumberger for 3D seismic, and FMC Technologies.
As upward pressure pushes up day rates for deep-water (especially ultra-deep) rigs, it's Transocean (NYSE:RIG) all the way. This year's already been a pretty good year for Transocean, despite some rather serious legal problems, and it's got a nice backlog of contracts. But we're also looking at Ensco and SeaDrill.
But hands down, it's GE Oil & Gas, General Electric's (NYSE:GE) fastest-growing segment, with annual 16% revenue growth over the last three years. GE is one of the most diverse companies out there, and it has carved itself a nice niche in the oil and gas sector. And it's impressively forward-thinking—from massive LNG projects to subsea drilling equipment. GE is positioned to experience significant growth.
This year has been an amazing year for GE Oil & Gas, with a list of contracts that would impress the biggest skeptic. Since January, GE has sealed a $620 million, 22-year contract for QGC's Queensland Curtis LNG plant offshore Australia; a $333 million 16-year contract extension for Russia's Sakhalin-2 LNG plant; a $500 million contract Petrobras for new pre-salt projects in Brazil; $600 million in multiple-customer propulsion system contracts; and most recently, a $147 million deal with Statoil for carbon dioxide injection. Adding to GE Oil & Gas' market share here is the recent acquisition of Lufkin Industries. Though it had a very rough time of things during the financial crisis, GE has turned around—and quickly. Downsizing GE's Capital Division has been fortuitous, and we see huge things ahead for this company.