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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Tom L. French who wrote (3150)11/19/1997 1:48:00 PM
From: Chuzzlewit  Read Replies (1) of 95453
 
Tom, <<Barron's says "with rig utilization around 95%... there's little opportunity for incremental revenue from new rigs... expected higher day rates next year are unlikely to compensate for lower revenue growth for new rigs.">>

I think this is probably true, but until new rigs come on line (which coincidentally keeps demand for existing rigs high) we can look forward to higher day-rates, and since the costs associated with existing rigs are fixed incremental revenues from these rigs should drop straight to the bottome line.

As far as I can see, the only thing that could bring this sector down is falling oil prices. A combination of sharply decreasing Asian demand and a very mild winter could do that, but even so, the effect would only be temporary. Until a significant number of new rigs come on line I think the entire sector will do well.

Regards,

Paul
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