The outlook for the land-based drilling rigs is different than the prospects for the ocean rigs and MoneyShow's Jim Jubak explains where he sees the best opportunity.

As the great oil industry analyst Gregory Stein said, a drilling rig isn't a drilling rig isn't a drilling rig.

What we've got right now is a need to separate the sector into different parts and different dynamics that—first of all—land rigs and ocean rigs are not at all the same largely because what you've still got hanging over the ocean, the deep water drilling sector is a lot of rigs on order for delivery, supposed to be delivered in 2015, they've been pushed out to 2016 but what that means is you've still got these rigs ready to come down out of dry dock and go into service.

They're going to be really, really new rigs. They will displace old rigs and that's what you're seeing right now in the sector. You're seeing companies scrap their older rigs.

Transocean (RIG), the owner of the biggest offshore drilling fleet has already scrapped 16 rigs so far in this downturn, more scrappage to come because their fleet is older than many, so that's what you're going to continue to see.

What you're looking at here is some of these rigs that are being scrapped say in 2014 at the peak were making like $640,000 a day on their day rate; now they're either being scrapped or they're being replaced by contracts of $300,000 a day, so you can see why the sector is still in decline. What you've got here is rigs are coming out of service but mitigating against a day rate increase all these rigs coming down out of dry dock, out of the docks where they're being constructed for delivery in 2016.

Land rig is a different story; you don't have this big bulge of orders for new rigs because rigs don't have to be ordered that far in advance for land rigs. What—instead you've got—is this problem that I would call rig equivalent rigs; that the problem for land based rigs is that they're getting more efficient. They at about a 20% increase a year.

When Fitch came out and said, “Well, you know, we think the bottom here is somewhere around 1000 rigs in operation,” and it looked like the number from Baker Hughes was pushing very closely toward that. The problem is that those 1000 rigs are 20% more effective than they used to be, so really, what you're looking for is say some bottom around 840 rigs or something like that if you think that the Fitch estimate is pretty good; in other words, we're not there yet.

If you're looking for a quick recovery, I think the bigger recovery in revenue is going to come in land rigs; there's much quicker turnaround and that's where you ought to be looking but I don't think we're there yet.