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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (5953)	6/2/2010 5:49:59 PM
From: Walter Bagehot	Read Replies (2) of 78462

Re: NE Interesting comments on the sector from way back when: Message 7694341 I am not at all familiar with the sector, but I don't really understand how pricing with some of these drilling companies operates. My assumption, if they are similar to shipping, is based on day rates or charters for a longer period. Therefore, buying at this stage might be buying in a tight market with strong (until now) demand for services that could be diluted by rig-building etc (caveat - I have no idea of the orderbook). That leaves me lost for a margin of safety in today's market. To be comfortable, I would have to understand how opex on each contract is derived, and what margin over break-even today's contracts are at, and where historical rates have been. Added to which, I don't know if I am even barking up the right tree...can anyone explain it further to me?

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