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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: dougjn who wrote (19943)4/22/1998 7:18:00 AM
From: JZGalt   of 95453
 
So what am I missing?

The first thing you are missing is rigs being converted to deep water operations. 6th conversion announced yesterday. 5 to FGII.

biz.yahoo.com

Remember what BigDog is saying. Rigs cannot be had unless you are willing to start paying way too much. I like to keep this little graphic in mind when thinking about this sector:

geocities.com

It doesn't take into account the entire world, but you should be able to see the trend.

The ability for NE to "add capacity" is reflected in this set of numbers. These are Zack's eps growth rate for next 5 years:

RIG.....34.5%
NE......33.2%
FLC.....28.7%
DO......28.5%
ESV.....23.8%
GLM.....22.8%
CDG.....20.0%

Now looking out 5 years on anything is BS and these numbers come from the same analysts who were telling us to be cautious in March because crude could fall to below $10/bbl. I'd just rather be at the top of the list than the bottom. [CDG's number look too low however].

For long term growth I'd rather own RIG than NE except that RIG trades at a higher p/e on forward earnings than NE does. RIG is trading at a forward p/e of 19 vs. 17 for NE.

The other thing you are missing is management. NE appears to be very good. Selling off the land based operations last year when they commanded a high price and allocating that capital towards upgrading toward the deeper water capabilities that are in the most demand for the forseeable future.

Now. Why do you think RIG, DO and FLC all look undervalued by 50%?
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