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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Thean who wrote (9855)1/27/1998 2:06:00 PM
From: Czechsinthemail  Read Replies (1) of 95453
 
Thean,
I think we are seeing the negative psychology toward drillers played out in lackluster price performance while oil prices climb. Part of the problem is that, as both analysts and CEO's have been telling everyone, the drillers are capacity constrained. Rising oil prices should reassure people that drilling will continue with virtually 100% utilization and that dayrates will remain firm or increase. But comparatively, there is more marginal impact on the E&P companies when oil prices rise, since they benefit more directly from the price increases.
If the market remains firm, I think we will see renewed buying in the sector simply on a bargain-hunting basis. There simply aren't very many opportunities to get anything like the growth you can find here with such a high degree of predictability. Firming oil prices simply make that growth somewhat greater and somewhat more predictabile.
If not before, once a few more earnings reports and upgrades come in, I think the stocks should take off. I don't think we have much of a downside risk from here. If oil prices come down, the momentum money that has gone toward producers will likely shift back into drillers as a more predictable play.
Baird
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