Welcome or not, the BP oil spill has put the spotlight on the oil industry. Although related exchange traded funds (ETFs) have not been hit too hard, a handful of stocks have, and as is always the case in a huge sell-off, investors should have a keen eye for undervalued assets.
According to Tony D’Altorio of Investment U, few people know that the oil exploration industry was in trouble even before the BP (NYSE: BP) oil spill. [BP Oil Spill Fallout.]
D’Altorio cites that back in 2008, drilling rig operation rates were nearly 85% in the Gulf of Mexico. By last summer, that number had dropped to 45%. In addition, the day rates for jackup rigs fell from $168,000 to merely $78,000.
Although the day rates recovered to around $115,000 and operation rates rose to near 63%, the BP oil spill blew up any signs of recovery. [Natural Gas ETFs Win in Oil Spill.]
However, D’Altorio thinks that the market may well have overreacted, providing a great opportunity for investors and other oil companies to scoop up dirt-cheap stocks.