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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Douglas V. Fant who wrote (18775)4/11/1998 9:07:00 PM
From: wggm  Read Replies (2) of 95453
 
Simmons has been a huge bull on this sector for a long time. I believe I read somewhere that they are based in Texas and specialize in the energy sector. The report cites "recent new contracts and bids" to support its lower day rate predictions. I am not in the industry so I can't refute comments made to the effect that these are only predictions and with demand so high and supply so low, why would contractors take 20% hits on new contracts, etc. I only know that other analysts have spoken in terms of a few thousand dollars when predicting softer day rates, not the ten thousand that Simmons does. Their earnings estimate for ESV in fiscal 1999 is now $2.96, substantially lower than concensus. I don't believe that this kind of softening is reflected in most analyst's estimates (certainly not for ESV) although it might be in the price of the stocks. I am thinking about liquidating my ESV position on Monday (I may switch into FLC). I think it says a great deal about the rationale for investing in this sector (ie. huge shortage of rigs) if day rates can drop this dramatically, even temporarily, when oil and natgas prices are at levels which make drilling profitable. If there is anyone in the industry with first hand knowledge about current rig contracts that can either confirm or refute Simmons, I would love to hear from them.
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