Strictly: Drilling and oil-field services Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: WWS who wrote (71202)	8/19/2000 3:53:40 PM
From: jim_p	Read Replies (1) of 95453

WWS, The only incentive needed for existing workover rigs to increase utilization and subsequently profit margins are high oil and to some extent gas prices, which we have had now for three quarters. The cost to perform a workover of an exiting well in nominal compared to the drilling of a new well. The average workover operation pays out in 1-3 months. Therefore the expectation of a decline in future oil prices should have no effect on the decision to perform a needed workover operation, which is not the case with land rigs. In addition, an oil well has a general need to be worked over from time to time to maintain maximum production which is not the case with a gas well. As the recovery expands and land rigs near 100% capacity, KEG's business will have an additional benefit in being called upon to perform the completion of news wells that are drilled. When land rigs are not in high demand, this operation is usually is performed by the land rig which drilled the well. KEG has some land rigs, but it is primarily a workover company. I have not been impressed with the results of the last two quarters and I am expecting dramatic improvements on Monday. If not, KEG will be history in my portfolio. After three quarters of record commodity prices and now an improved capital structure, KEG will be out of excuses come Monday. The workover business is not a glamorous business, it's the bottom of the barrel in the oil patch. Labor is and has always has been a very serious matter. Workover companies are so disparate that many employees are ex-cons, who can't get jobs anywhere else. It has the highest workers compensation rates of any business in the oil patch, due to the poor quality of the employees and the high turnover of employees. It's not uncommon for workers compensation to be the second highest cost of doing business behind salaries. Jim

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next