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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Challo Jeregy who wrote (23857)6/11/1998 5:49:00 PM
From: Grommit  Read Replies (2) of 95453
 
Very good posting. If you missed it, anyone, check the message I linked to. There certainly is reason to believe that the oil glut will continue for a year or even longer. And, like you say, we all expect these companies to rebound eventually. But when?

Short Term:
If Dog's information is correct that rigs will be stacked (and I recall seeing a link here a couple of weeks ago which pointed out that the number of rigs having their contracts about to expire and without new contracts has gotten unusually large - which supports Dog) then there will be warning press releases for Q3 and there will be warnings given during the Q2 conf calls. (I think Q2 is in the bag already and there will not be much of an effect.) So there may not be good news on the horizon unless OPEC comes through. Do not hold thy breath.

My impression is that all the downgrades so far are due to dayrate visibility and that the utilization effects will be another whammy. Note that dayrates only affects the drillers themselves, but utilization affects all the supporting companies.

Long Term:
Even though many denied it, these companies are cyclical and dependent on oil prices. Presently this upcoming cycle is viewed as a gentle weakening and these companies are still projecting nice profit levels. I wonder if this could be a very deep or very long correction. There is even an unprecedented chance that this could be a "very permanent" shift in energy prices. You will all scoff at this notion.
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