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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Tomas who wrote (5932)	1/7/2002 10:26:53 AM
From: Terry D	Read Replies (1) of 206325

Tomas - Raymond James says bottom - Bear says not yet. RJ is always more bullish - but Shoemaker has consistently been more optimistic than the better known Leuffer at Bear. Place yer bets. Robin Shoemaker - Oil Service & Equipment Lowering EPS Estimates for 2002 The slump in North American oil and gas drilling that began about six months ago is not turning out to be the “short and shallow” downturn that the optimists expected. In our conversations with oil service companies in early 2002, we hear caution and concern about oilfield activity and pricing trends, especially in North America. By now it is clear capital spending on oil and gas drilling will be down 15%-20% in 2002 in North America and flat (at best) in the international markets. We believe oil service companies will convey a much less optimistic outlook for 2002 in their conf. calls discussing Q4 results and expectations for 2002. As recently as November and December of 2001, most of the oil service companies were adhering to a view that international markets would remain strong and that domestic markets would bottom in early 2002 and begin a brisk recovery in the second half of this year. We believe this stance is no longer realistic and the managements of the oil service companies are beginning to back away from their earlier forecasts of a short and shallow drilling downturn. We lowered our 2002 EPS estimates across the board: large and small oil service companies and offshore drilling contractors. (Both our old and new estimates for 2002 reflect the elimination of goodwill amortization under new accounting rules that came into force this year). On average we lowered our EPS expectations by 11%in 2002. The factors that combine to push earnings down are the trends in drilling activity and the pricing of equipment and services. The downturn in drilling is mostly confined to North America. In the international markets only Venezuela and Argentina appear to be headed down significantly in 2002. We think the cycle in oilfield services is not yet close to a bottom. We are only six months into the downturn (the last one was 18 months from peak to trough) and the evidences of the downturn are only now starting to appear in certain market niches. We look for a better buying opportunity in oil service stocks later this year. Our 11% average EPS reductions may not be the final round of estimate reductions for 2002, especially if international markets start to slow in terms of activity and weaken in terms of pricing.

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