Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Thean who wrote (5301)	12/15/1997 9:58:00 PM
From: Big Dog	Read Replies (4) of 95453

Thean -- The drillers could give a hoot about whether the oil companies are making money or not. They will suck every last dime out of the oil companies as long as they can. It is a text book case of supply and demand...only the demand is inelastic since it doesn't matter how much you charge, it won't diminish the demand. The drillers have a memory. They remember in the 80's when the industry was decimated. When day rates for jackups in the US Gulf were 8000 or 9000 a day -- below direct operatiing costs of about 12,000 a day (this does not include any capital costs, just labor and fuel). The oil companies did not give a crap about the financial disaster they were forcing on the drillers. This caused a lot of rigs to go without needed repairs and put a lot of people out of work. Basically the oil companies were not paying anywhere near a "fair" price and they (the oil companies) were loving it. Well now the tide has turned. And the same guys theat ran those drilling companies then, run those drilling companies today. I bet they are smiling from ear to ear being able to stick it to the oil companies...so don't EVER think the driller will cut the oil companies ANY slack as long as the rig demand is strong. Oil companies have set themselves up as the enemy long ago. They chose to do the wrong things to a lot of people thinking they were smart. They were stupid and still are stupid. They are generally bureaucrats that don't have any sense of reality. They are up against the most entrepeneurial group of business men in the world -- the drillers. Guess who will win? The oil company guys that make these rig decisions have never risked a dollar in their entire lives and now their companies are paying for the short sightedness of 10 years ago. Right now the drillers have 'em by the gonads and they are squeezing tight. There are too many oil companies with huge dollars ready to snap up any rig that another oil company doesn't want -- instantly. Until this changes -- and there are only signs of it INCREASING -- this sector will outperform any asset class in the world. Bar none. Just hold on to your britches and watch the show. (Would you say I am bullish?)

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