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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: hal jordan who wrote (22128)5/15/1998 5:05:00 PM
From: Czechsinthemail  Read Replies (1) of 95453
 
Hal,

My suggestion would be that you do some study to familiarize yourself with the drilling business before plunking your money down. Though there are too many posts on this thread to be able to backtrack, you might check the ENSCO (ESV) and Transocean (RIG) threads. Also, their websites might be helpful:
enscous.com
and
deepwater.com
Other threads well worth exploring for an overview and comparison of these companies:
rgdoczzz.home.texas.net
and
marketguide.com
Where the best values are to be found I think depends on who you ask and the assumptions about oil prices, drilling expenditures and the profitability or risk involved in building new rigs. When oil prices are weak, deepwater drillers like RIG are likely to be the most secure and predictable because of their long-term contracts. But you pay a higher PE to get into them. Shallow drillers, like ESV, carry lower PE's, but there is more flux in their business around oil prices and their business may suffer more particularly if oil prices remain weak for a prolonged period. Land drillers are even more sensitive to oil prices since when oil prices are low their rigs are taken out of service more quickly. If you have a big increase in oil and gas prices, land drillers will likely be the biggest beneficiaries, followed by shallow offshore and deep offshore drillers. My own view is that ESV at current prices offers perhaps the best value among the drillers IF you assume oil prices aren't likely to go down much further and that they will likely rise later this year.
Companies in the supply boat business trade at very low PE's and may be great values unless fears of overbuilding materialize.

Another way to play it is to invest in some of the companies building or refurbishing rigs. Many of them carry pretty healthy backlogs that may produce healthy growth for some time to come unless the sector weakens enough to reduce demand for additional building.
I would again suggest doing your homework before investing. Some of the initial appearances begin to dissolve when you begin examining the different companies more closely. Things like income from non-recurring transactions can distort reported PE's, and differences in fleet composition can have a big impact on business prospects.
good luck,
Baird
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