Remember the Exxon Valdez

Increased regulation in the wake of the Exxon Valdez oil spill set the stage for a golden age of shipping companies like Frontline. The increased costs imposed by governments mandating double hulls put many smaller shippers out of business. It allowed the giants to grow and control the industry. In addition, it gave the oil companies a strong incentive to lease ships instead of owning their own.

This article from the Wall Street Journal is entitled New Drilling Rules Imperil Some Rig Operators. It explains that new blow-off preventers (BOPs) mandated by congress are too large for many old rigs to accomodate without spending "billions of dollars to upgrade them." Many rigs will move from the gulf.

In my opinion, the WSJ has this story all wrong. It should say something like "Golden Future for Rig Operators with Modern Fleets." Time to buy more Seadrill. I would not be surprised to see the dividend bumped up to $0.75/quarter by Q1 '11.

However, I'm going to wait a little on this, as the chart shows Seadrill at a significant premium to the 50-day moving average.