Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Douglas V. Fant who wrote (24102)	6/16/1998 10:48:00 PM
From: Sunny	Read Replies (2) of 95453

Thanks Doug, Coming from the equipment side of the business I tend to focus on drilling cost most strongly. Apart from Casing the cost of drilling is driven by time related cost. How fast do you get it drilled. In light of the recent price collapse it is interesting to think about what might become of an industry that was afraid to say boom 9 months ago. Thinking back to LAGCOE in Lafayette in October 97 you would of thought that the boom was on again, people were just afraid to say the word. The recent cutbacks from the land drillers is amazing. UPR is down 80% in the last 3 or 4 months. (65 to ~15 rigs) Sonat is selling out of the Chalk. We are also beginning to see the slow down offshore. Most of the major service companies in the Directional drilling business have a job count that is a small fraction of just a few months ago and few prospects on the immediate horizon. You are even seeing these same companies lay off or reassign experienced Directional drillers to other jobs. It seems like a short time ago that experienced people availability was the limiting factor with several of these companies. Having managed sales and service organizations in 81-82 and 86-88 it is a bit frightening to think we could revisit those days. The only thing that gives me heart is that the low rig count in 86 was 667, down from ~2500. So we do not have that far to fall (I hope!) Deepwater is a bright spot because of the lead times and commitments made. The downside is the shelf where the day rate of 300' water depth jackups is down 2.7% already this year (source Reuters). I think the land drillers will be in the tank for a while especially if the oil price holds in the 13- 15 range. Cash flow is king and the smaller land based operators will be conserving it while they see where this is heading and hoping for a better day. My little company has grown at a 60% compound annual rate for the last 2 years. I thought I was being conservative when i only forecasted a 20% growth for the year. That number could be in jeopardy if we don't get some price relief and I don't see it happening. i would be interested if you have a Major Oil perspective that provides a source of optimism. Sunny

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