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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Big Dog who wrote (73984)9/20/2000 4:57:49 PM
From: Big Dog  Read Replies (2) of 95453
 
GENERAL COMMENTS FROM THE DRW ENERGY CONFERENCE
The most notable points coming out of the DRW Energy Conference focus on the
strength on North American natural gas driven activity and the continued low
spending levels by the major oil companies both domestically and overseas.
U.S. natural gas drilling has increased by about 125% from the bottom of
April 1999. Gas wells cost E&P companies about 50% more to drill and complete
than oil well, which has had a very favorable impact on the oilfield services
industry.
Land and offshore drilling activity in the United States is very strong,
with natural gas drilling at its highest levels since data started being
tracked in 1988. Offshore drilling is at the highest level in almost 15
years. The current strength in natural gas prices and the increasing focus on
deepwater drilling should keep these drivers moving up. This is proving to be
as significant benefit to the offshore and onshore drilling contractors as
well as companies that provide casing and tubing to these rigs/wells.
The disappointment has been in the lack of the expected acceleration in
spending by the major oil companies. At mid-year, we and others observed that
the major oil companies has significantly underspent its capital budgets. It
was expected that they would increase spending and play 'catch up' in the
second half of the year.
Oil companies basically confirmed this on the June quarter conference calls
and even indicated levels of increased spending and budgets for next year.
However, teh operating/asset groups at most oil companies have not yet begun
to increase spending. Consistently, companies at the conference are noting
that while there has been some increase in bidding activity, it has yet to be
followed with actual orders.
It is becoming an increasing concern as to whether the major oil companies
will, in fact, spend there allocated budgets this year. Clearly, commodity
prices justify and warrant the spending of these budgets but the continued
integration and restructuring in these companies appears to be continuing
longer than expected.
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