I'm speaking about Ensco
International (NYSE:ESV) and Oilsands Quest Inc. (AMEX:BQI). Yes, they both
are in the energy arena and they both have a great deal of upside potential.
Yet only one, ESV, is what I'd call a "value play." Here's a company that
provides offshore contract drilling services to the oil and gas industry and is
selling for only 10 times this year's earnings...and it is the kind of company
that could have an earnings surprise on the upside this quarter or next!
If you look at its giant peers like Schlumberger
(NYSE:SLB) and Transocean
(NYSE:RIG) you will see that its PE ratio is closer to RIG on the bottom
side. ESV is more akin to RIG than SLB, and in all fairness I should compare it
more to RIG and to Diamond Offshore (NYSE:DO).
Speaking of DO, it is selling for almost 20 times this years earnings, almost
twice as much as ESV. Forward earnings comparisons are similar, but the ESV
forward PE ratio is almost 20% lower than DO.
Both ESV and DO are still selling above their 200-day moving average and are
well off their 52-week highs. The same could be said for Oilsands Quest (BQI).
BQI is a different, smaller breed of cat. It is a Saskatchewan and Alberta
oil sand company that recently became well known after the likes of Jim Cramer
began touting it.
The company, formerly known as CanWest Petroleum Corporation, was founded in
1998 and is based in Calgary, Canada. As Matt Badiali who edits the S&A
Oil Report recently wrote concerning BQI:
"Roughly 100 companies own a little more than 30,000 square miles of
Alberta oil sands.
"Doing a quick calculation suggests each company holds, on average, about
300 square miles or 1% of the total.
"But, of course, that fails to account for the large tracts held by
companies, like Suncor (NYSE:SU) and Syncrude, which dominate the total area. So
really, most of those 100 companies hold much less than 300 square miles.
"At the same time, that land is increasingly valuable. Companies are
willing to squabble over the seemingly small patches they own.
"For instance, Ivanhoe Energy (Nasdaq:IVAN), a newcomer to the tar sands,
bought about 37 square miles of leases from Talisman Energy (NYSE:TLM) for a
whopping $105 million. That works out to $2.8 million per square mile of
undeveloped tar sand leases.
"Oilsands Quest owns about 1,200 square miles of tar sands – much, much
more than the typical oil sands company.
"On top of that, if we use the Ivanhoe/Talisman deal as a benchmark,
Oilsands Quest is worth about $3.2 billion. That value is 163% higher than its
current price.
