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Putting a price tag on oil & gas drillers

The West Phoenix oil platform, operated by Seadrill Norge AS, center, stands in the Port of Cromarty Firth in Cromarty, U.K.
Matthew Lloyd | Bloomberg | Getty Images
The West Phoenix oil platform, operated by Seadrill Norge AS, center, stands in the Port of Cromarty Firth in Cromarty, U.K.

If you want to look for a lousy business to be in, forget about gold mining. Or aluminum. Or iron ore. How about being a standalone oil and natural gas driller? Not an exploration and production company, but a company that is hired to drill for oil and natural gas.

THAT is a lousy business. And that's what Seadrill, Ensco , Hercules Offshore, Transocean, Rowan and Diamond Offshore do. They drill, mostly offshore. Big rigs that go deep, usually deep into the ocean.

After a huge rally in the past week, they're all down double-digits Tuesday, largely on the Goldman Sachs call pouring cold water on the recent commodity rally.

Seadrill — just to take on example — went from $6 in December to below $2 in mid-February. But in the last couple weeks, it rocketed back to close near $6 Monday. A complete round trip, in three months! Two weeks ago, it was trading like it was going out of business. Similar story for the others. Now, drillers are the comeback kids.

But on Tuesday, Seadrill went back to $5.15 on the Goldman call.

What's it all mean? It means we have no idea how to value any of these companies, because we have absolutely no idea what the business will be like six months from now. Cannaord's analyst Alex Brooks put it succinctly, speaking of Seadrill specifically but it could stand for the Energy industry in general: "the outlook for further work is terrible, and multiple rigs remain uncontracted through 2016 with many more coming off contract in early 2017."

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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