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Gold/Mining/Energy : Global Santa Fe (GSF) (formerly Global Marine)
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To: Elmer Flugum who wrote (493)11/11/1997 11:47:00 PM
From: Czechsinthemail  Read Replies (2) of 2282
 
Len,

You mentioned the lower than average PE of GLM relative to the other drillers. Of course, this brings up the tax questions again. Have you compared the companies on a cash flow basis?

Also, the strongest sectors for dayrates are the ultradeep and harsh environment rigs. That would tend to favor NE,DO,RIG and RB among the deep offshore drillers and SDC with a strong harsh environment fleet. I like the economics of the ultradeep drillers both because there is increased demand around the deepwater Gulf of Mexico leases but more constrained supply. It takes at least two years and a pile of money to build new deep drilling ships, so they are not likely to come into supply/demand balance for some time to come. Two of the companies, Noble (NE) and Santa Fe International (SDC) seem particularly attractive around their capacity to dramatically increase earnings. NE is converting several of its shallow submersibles to deep drilling semisubmersibles, which will earn much higher dayrates. SDC has virtually its entire fleet up for new contracts within the next year or two; that should allow them to take maximum advantage of the high prevailing dayrates.

Actually, all the offshore drillers should do well. Holding on to GLM, particularly if you have capital gains on it may make more sense than trying to shift into one of the other companies. Overall, it is a very promising sector with a continuing rising tide that should float everybody's boat higher.

Good luck.
Baird
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