Mike, your essay was brilliant. I'll try to make a CDG contribution:
I've only posted here once or twice, but I just left a private server group (with some very rude egos) and felt I needed company...
I decided to call Cliff's Drilling Friday afternoon. I knew they were bored and that NO one had called them about their business lately :)
I talked to Cindy Taylor, Controller. Nice lady. Texan drawl and all.
First the revenue/operation stuff...
-40% of their operating rigs pump natural gas. These are primarily in
the Gulf.
-60% pump oil.
-15-20% of their revenue comes from turnkey operations (fixed contracts
to drill a particular well).
-80% of their revenue comes from dayrate contracts.
Now the current earning situation...
-there are continued increases in dayrates for rig leases as we speak
(write).
-their customers have made their budget plans based on $17-$18 a barrel.
-if there is a continued downdraft in the price of oil, we're talking
6-12 months, then some of the smaller oil companies may have to cut back
on exploration.
-the "lion's share" of Cliff's contracts are with larger corporations.
-FWIW, recent estimates are that oil will average $18-$19 a barrel in
1998.
-the company is very comfortable with current quarter earning's
estimates (since the quarter ended in December, they have a good idea
what is going on).
-they are also comfortable with analysts 1998 earnings estimates and
have planned their budget according to similar projections.
The only question is the price of oil and how long this current fall
will last.
No analysts downgrades to speak of except for the major oils.
From all I can see, 1998 should be a stellar year because most of the
contracts are locked in through that period and day rates continue to
increase. I don't get it. Oil is a commodity, but this current situation seems very different to me from the semiconductor nightmare a couple years ago. There were downgrades all over the place and excess capacity.
Rigs supply is VERY tight and will not improve for at least 1-2 years.
So here I sit, drinking my Gulf Oil cocktails by the gallon, driving
everywhere I can go, keeping the home hot with natural gas and cooking huge, gas burning (not producing) dinners. If the current situation continues, I'll be loosing more per day than the Justice Department threatened Microsoft in fines.
That said...no predictions here, but man oh man what a nightmare we've been through.
Diamond H |
