Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: RBlatch who wrote (50947)	9/11/1999 10:46:00 PM
From: SliderOnTheBlack	Read Replies (3) of 95453

<the man power shortage actually drive up day rates for the drillers as this will cause a rig shortage > RBlatch - good point; but taking it even further - it implies that Nat Gas supply demand will not be able to be met; as they will not be able to put enough rigs to work fast enough, due to the manpower shortage. Every fundamental driver for Nat Gas is leading to a "rationing by price" atmosphere. Merrill's call of $3.75; and potentially sustained for a few months makes sense to me - and this is not even factoring in ANYTHING weather-wise; strictly based on the number of rigs drilling for gas. Another reason for leverage towards the Nat Gas pure plays in E&P land... Merrill Lynch is talking about$3.75 mcf Nat Gas by December. ML also made some interesting comments on the lagging E&P's here as a buying opp - pre OPEC meeting & with all the Energy Conferences. - a sweet spot buying opp imho. The upside to some small & mid cap Nat Gas E&P's at those prices - exceeds anything the drillers saw dayrate-wise at the peak of their cycle... $3.75 will be "DOUBLE" the realized gas prices of the first 6 months of the year. It's going to get real interesting... Also; IIR is a super opp here. Great Middle East connections and strong Intnl business. Made some good acquisitions - poised for the upturn. Together with NOI - you lock in a big chunk of the "Picks & Shovels" aspect of the coming upturn to onshore drilling; as they are the very companies that will supply parts & equipment to get these cold stacked rigs up & running... BULL - IIR is a great Intnl growth play longterm and is a buyout candidate sooner, or later - at a big premium from here. IIR is a $lihypster 10* pick (VBG)... I also like MDR & GLBL here; and very much so. MDR is a tremendous longterm play... there is no major player,with this level of cash. GLBL going on an acquiring run here shortly ? - buying HOFF ??? (VBG). I still like the E&P's nearterm for max upside- but the laggard service companies are looking very, very good here - on a selective basis. PS - in my homework of late - big warning on everything SEISMIC folks - imho. Read the 2000 AND 2001 forecasts or VTS for example... no where near the earnings levels of the prior run. I saw something keep popping up in my E&P research. Many of these companies have a huge backlog of drill ready prospects - with ALL the seismic allready done. Plus - there were numerous companies that couldn't pay, or cut deals for warrants as payment for seismic work - VTS has at least 2 such situations. The GOM Lease Sale endorses this as fact - that the E&P's allready have a near full slate of drill-ready projects and seismic is going to be a slow upturn here... Longterm - VTS is a great company; PGO has the FPSO business - a brilliant mgmt move - they could surprise... but, I would be very carefull of the MIND's, the IO's, the GGY's , the OMNI's etc.... nearterm; just much, much better prospects elsewhere.

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