SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Gold/Mining/Energy : Strictly: Drilling and oil-field services
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Teddy who wrote (6698)1/6/1998 12:10:00 PM
From: Czechsinthemail  Read Replies (2) of 95453
 
The fears about falling oil prices have been weighing heavily on drilling companies, but two items are worth noting. One is that consumption rather than oil prices have historically been the main influence on drilling activity and drilling company performance, showing a much stronger correlation than oil prices. Rauscher Pierce analysts emphasized this when the issue came up last quarter.
The second item is that while oil prices have been falling, the drop is much more pronounced in the spot market than in the futures market, especially the more distant months:
oilworld.com
So long as the distant futures prices remain relatively high, companies can undertake drilling projects with high confidence in their ability to make money. They can (and do) hedge by selling futures contracts. Since drilling activity and demand for rigs remains strong, the way to bet is that the panic selling will end--around earnings release time if not before.
For those wanting to prune and reposition, I think the deep offshore drillers offer the safest and most predictable play, land drillers and drilling equipment companies will likely show more volatility.
My favorite at this point is NE due to the combination of a particularly strong 4Q earnings report due, the company's share buyback program, and the predictable growth from their rig conversions that will increase earnings even if overall dayrates remain unchanged.
Patience,
Baird
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News