Until emergency crews can stem the flow of oil that is leaking from the broken well-head in the gulf, other drilling firms will continue to see their shares under pressure. The Obama administration has signaled that additional drilling permits may not be issued in the region, which is bad news for any firms that had ambitious plans for gulf coast exploration. For example, shares of McMoran Exploration (NYSE: MMR) are down another -10% in today's trading after a similar dip on Friday. In fact, MMR has shed nearly half its value in the last six weeks, partially due to persistent weakness in natural gas prices as well.
Other firms affected include: Gulf coast equipment provider Cal-Dive International (NYSE: DVR), which took it on the chin Thursday and Friday but is holding its own today; Diamond Offshore (NYSE: DO), which is now down more than -10% in the last three sessions; and Transocean (NYSE: RIG), which is off nearly -4% today after falling more than -7% in each of the prior two sessions.
Of course, if the oil spill is capped more quickly than is currently expected, and sentiment for renewed drilling returns, these stocks are likely to see a healthy snap back. It would help to also have natural gas prices firm, though we are a few months away from the peak summer season, when demand for natural gas spikes. Any demand boost, coupled with gulf-related supply constraints, could be the catalysts this group needs.
The flooding in Nashville, Tenn., this past weekend is likely to generate large losses for many local businesses, especially those that rely on tourism. Gaylord Entertainment (NYSE: GET) announced that its landmark Opryland complex will be closed for at least several months. If the levee breaks, then the complex could suffer even greater damage - in excess of the $50 million its insurance policy would reimburse.
Shares of Gaylord had made a remarkable run as the company’s convention business showed signs of a solid rebound. But shares are off by double-digits today, and investors should not seek to use the weakness as a buying opportunity as shares still remain pricey in relation to profits. Management is likely to be unable to quantify the extent of the flooding damage in this evening’s earnings release.
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