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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: BigBull who wrote (65528)5/1/2000 8:27:00 AM
From: Big Dog  Read Replies (2) of 95453
 
Dain Rauscher on FLC:

FLC: DELAYS IN BRAZIL WILL IMPACT QUARTER AND YEAR

We lowering our estimates for the first quarter to ($0.22) from ($0.14) and
dropping the second-quarter estimate slightly to ($0.16) from ($0.12).
Deepwater rigs that were scheduled to begin operations in Brazil in the first
quarter are being delayed for a number of reasons, having a negative impact
on the numbers for the first half of the year. We are still optimistic about
the second half of the year and 2001.

The debt level provides for a debt-to-capital ratio of slightly more than
70%, and while the company has signficant operating leverage and cash flow
generation, we want to wait and see some of these new deepwater rigs begin
operating well before we make any categorical decisions about the stock.

Further, we believe the company will issue equity this year at some point
to pay down debt, especially the PIKs (payment in kind) before the first
quarter of next year. We would use any filing as a potential buying
opportunity, believing the company will wait until operations are humming
before making that move.

Stock Opinion

R&B Falcon continues to have one of the highest debt levels in the industry,
at approximately 71% debt-to-book capital. This significantly reduces its
flexibility to take advantage of the potential consolidation activities
projected to take place within the industry. Therefore, we continue to rate
FLC Neutral due to the company's highly leveraged balance sheet in the
current, difficult operating market.
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