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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Czechsinthemail who wrote (6735)1/6/1998 3:29:00 PM
From: Big Dog  Read Replies (3) of 95453
 
What I don't understand re RIG getting out of the turn key biz is why the 12 mill write off? What is there to write off?

For those of you that may not know, a turnkey contract is when a drilling contractor drills a "loggable" well to a certain depth for a fixed price. This is as opposed to a day rate contract where the driller gets paid a fixed amount per day for however long it takes to drill the well.

In the past the oil companies would get the driller to do the higher risk holes -- those with high pressure gas and such -- under turnkey. Also when the oil companies slashed their E&P departments, they had fewer people and so they depended on the driller, who were begging for work and willing to risk anything for a job, to manage and drill the well at a fixed cost.

I can see where turn key would not be a great business right now and it makes sense for RIG to get out.

But why the write off? What is there to write off? Maybe they are realizing some losses from turnkey contracts in progress? There is no equipment to wwrite off. Turn key is simply a different way to get paid.

Anyone have a idea on this?

I bet the folks that don't know poop about this market -- namely the analysts -- will run with this "loss" info and say this is a crack in the profits for drillers. But right now I don't think there is ANYTHING ANYONE can say that could hurt the stocks. They are hurt so bad that to step on 'em again may start to feel good, just for the attention.

I HAVE NO FEAR !!!

Glen, if you would just short something we could put an end to all this.
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