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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Bazmataz who wrote (6641)1/5/1998 4:57:00 PM
From: bw  Read Replies (1) of 95453
 
Barry...As you probably know, RDC has taken a bigger risk than some of the drillers as per future growth in the sector. By building new rigs without contracts, they have gambled that future replacement costs will exceed current rate levels...This is all spelled-out in their *S&P reports and on quarterly...
It's still a great company and undervalued at these levels IMO..
I listened to one of the analysts yesterday comment on FGII and other "heavy metal" companies in the sector. His views seemed to say that the builders were even more cyclical than the drillers..in that their services are quick to de-materialize during any downturns.

*While Rowan has procured a favorable contract for Gorilla V
(expected delivery in the third quarter 1998), the agreement only covers about 40% of the total construction cost. Extension of this contract plus procurement of favorable commitments for Gorilla VI and VII (expected delivery in 1999 and 2000) could offset the risk that the rigs will not garner economic rates when the equipment becomes available. Current market conditions indicate that this is probable, yet considerable uncertainty remains given the time it will take to build the latter units.

Good luck
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