Bookkeeping: Selling Diamond Offshore (DO) - Will Buy Noble (NE) Later

I am closing my smallish 0.5% stake in oil driller Diamond Offshore Drilling (DO) after yesterday's "decent, but we still missed" earnings. I take that as a sign they are not managing the Street's expectations very well. While all the oil service plays should move together (i.e. if crude continues up, I am sure this name will continue up) I prefer to stick with the better performers.

I've had Diamond Offshore since day 1 of the fund, and somehow managed to lose $2200 on it. This is a 1 year chart, and since August its done ok, but my timing of trades on this issue has been poor to have lost money. While this has been in the portfolio for a long time, it has never been a huge stake. (chart is not working, I'll update this post later)

I'll most likely replace this name with Noble (NE) which had "better" earnings and has a very nice relationship with Petrobras (PBR). But since Noble is very extended I am not going to do this "flip" today. Both stocks have returned about 10% in the past 6 months, so it might a moot point frankly. I still think this entire group is undervalued and they are being priced as cyclical companies, in a secular growth environment. Noble for example has multiple years of backlog waiting, yet people are pricing the sector as if crude is going back to $45 in a few months. This has been my frustration with the entire sector for quarters on end.

• Noble Corp (NE) said on Wednesday its first-quarter earnings rose 54 percent, exceeding Wall Street estimates, as oil and gas exploration companies paid higher day rates for its offshore drilling rigs.
• Profit soared to $384 million, or $1.43 per diluted share, from $250 million, or 93 cents per diluted share, in the same quarter a year earlier.
• The average daily rental rate for the company's rigs jumped 35 percent from a year ago to $163,772.
• Sugar Land, Texas-based Noble added almost $5 billion in possible revenue backlog during the first quarter.
• Noble has 62 rigs operating in areas including Brazil, the Middle East, India and West Africa.
• Noble (NYSE: NE) lining up a massive contract renewal on five deepwater rigs that are already in Petrobras' service. The deal adds up to roughly $4 billion of revenue potential across 29 rig years, with individual contracts extending out as far as 2016.
• The huge backlog addition allows Noble to undertake some major refurbishment work on three of the rigs.
• Click here to see the graph of how much dayrates will rise for Noble in the Petrobras relationship

Long Petrobras in fund, no personal position