One of the most buzz-worthy trends in the technology sector happens to be in robotics and automation. As firms look to remove human error and reduce costs, many of us are going to be sharing a cubicle with a robot soon enough.
While many different industries are seriously looking at automation, the concept will have a bigger effect on certain sectors than others.
As lower oil prices have taken hold, oil companies have looked for any way to cut costs and be profitable. At the same time, long-term trends in energy demand has many oil companies’s exploring new depths in harsh environments. These scenarios are extremely bullish for those companies designing robots to hunt and gather crude oil and natural gas.
For investors looking for the potentially best stocks in the energy patch, the trend could be extremely bullish as well.
Coat Savings With PIGS, Self-Walking Rigs
The energy patch is beginning to look like a science fiction movie. Besides the sci-fi otherworldly look of an offshore drilling platform, there’s now plenty of non-human workers doing important and dangerous jobs abroad the massive structure.
The robots have come to the energy sector, and it’s only going to get more automated in the future.
Driving that shift towards a more automated environment has been the need to control costs. Historically, operating in the energy patch has been an expensive endeavor. From manpower to equipment, it takes some pretty big dollars in order to drill a well.
However, with oil hovering in the $45 to $60 range, every penny counts. With that in mind, robots are quickly getting the attention of the oil and gas industry.
By automating much of the process — drilling, inspection, completion, etc. — oil companies hope to extract some real cost savings from their operations. Some in the industry have postulated that energy firms could save as much as $3 million per day offshore as they continue to automate.
That huge amount of savings seems to be in the ballpark as early forays into robotics by Norwegian energy major and offshore superstar Statoil ASA(ADR) (NYSE:STO) have allowed STO to cut in half the number of workers required to run an offshore rig as well as complete tasks up to 25% faster.
And the costs savings doesn’t just happen in the deepest parts of our oceans. The energy industry on dry-land is also seeing huge advancements in robots in the name of being cheap.
Believe it or not, picking up a drilling rig and moving it to a new location costs about $900,000 — even if that location is only a few yards away — because you need to break-down the rig, load it up on a truck and re-assemble it at the new location.
Today’s new advanced walking rigs — which move themselves with a flip of a switch — essentially pay for themselves after a few uses. Likewise, new drilling pipes fitted with high-speed data cables are able to send real-time information back to these rigs to help drill rates.
Another example, operators in the midstream sector have long used “PIGS” to clean-out pipelines from within. However, today’s newer robotic smart pigs can do a variety of functions — such as detect leaks and cracks — before they become big problems.
And while cost savings is a huge motivating factor, the fact that we are now pushing the envelope in terms of where we are drilling is also adding to the use of robots in the energy sector. We are now drilling in the deepest parts of the oceans or in some of the hardest rock on earth. Places where a human simply cannot tread.
2 Best Stocks For Energy Robots
Automation is coming to oil and gas industry over the next few years — making it one of the best stocks plays in the sector. Leading the charge is Oceaneering International (NYSE:OII).
OII makes and operates remote operated vehicles (ROVs). And not just any ROVs but some of the most state of the art submersibles on the planet. Oceaneering’s latest Nexxus ROV is the size of a Buick, can be operated from a plane, can pump 60 gallons of fluid a minute at pressures of 5,000 pounds per square inch, has lasers, includes, ultra-high definition cameras and can lift as much as 550 pounds — all while working at ultra-deepwater depths.
And while OII stock has sold off hard along with oil prices, the truth is energy producers are going to be looking at Oceaneering’s advanced technology to save them some serious coin on deepwater projects started during the boom years. During its latest earnings report, OII managed to beat analysts’ profit forecasts, and while it guided lower for the rest of 2015, Oceaneering could surprise again as energy companies tap its expertise.
For investors, OII is now trading for a price-to-earnings ratio of 14 and 2.02% dividend yield, which makes OII one of the best stocks to buy for the robotic energy patch.
On land, the story is walking rigs and no one has a fleet as advanced as contract driller Patterson-UTI Energy, Inc. (NASDAQ:PTEN). PTEN’s new Apex Walking rigs reduce non-productive time as well as improve safety when used by energy producers. Ultimately, the reduction in downtime results in a reduction in costs.
Small-cap producer Matador Resources Co (NYSE:MTDR) predicts that it is saving between 15% and 20% per well by using one of PTEN’s Apex rigs.
That kind of savings is enough to turn an unprofitable play — given current oil prices — into one that is. PTEN should continue to get the nod from energy firms as they look to improve their cost structures and work with lower CAPEX budgets.
PTEN shares are currently trading for a P/E of 22, which is not super cheap, but given its potential to save money — and earn long-term profits — Patterson-UTI Energy could be worth the investment. Sweetening the pot is PTEN stock’s 2% dividend.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
